Inflation
Hi Team, I hear everywhere about "underlying inflation", "trimmed inflation" and "mean inflation". To me, a very ordinary, average person, inflation is inflation. Could you explain what is the difference, please. Regards, John
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Answer
Hi John,
Depending on the bias of the information being read either of the main inflation numbers are often highlighted, on 31/7/24 we received the following data:
- Australia’s annual rate of inflation rose 3.8% year on year.
- The “trimmed mean” measure of inflation, an important measure of underlying or “core” inflation which the Reserve Bank focuses on, fell slightly from an annual rate of 4% to 3.9%.
The “Trimmed Mean” is the main focus of the RBA and hence financial markets, and it excludes the items that have had particularly large price changes, in other words it smooths out the data, e.g. if fuel surges due to unrest in the Middle East may be removed from that month’s data. The important thing with inflation is about trends, and inflation is trending lower since Dec quarter 2022 where it was at 7.8%.
