OT - Inflation [Was Re: Drivers massive pay rise]

[jshugg@westpac.com.au]

In article <399d582a$0$786$7f31c96c@news01.syd.optusnet.com.au>,
  "Tezza" <tezza2000@dingoblue.net.au> wrote:
> So these are the true inflation rates or the governments
> "underlying"inflation rates. Sounds like the latter to me.
>

No, the rates I quoted were the headline rates published by the Aust
Bureau of Stats.  The underlying rates you refer to are no longer
officially published (the ABS stopped in June 1999), but Westpac's
economics department still calculates them.  Underlying rates exclude
things like petrol, fresh food, drugs, train fares (keeping this a bit
on-topic) and more.  These are items with volatile prices, or things
whose prices are not directly influenced by the economy's strength, but
by government regulation or other factors.  Underlying inflation does
not reflect the price increases the average household faces from day to
day, like the headline rate purports to, but it is a measure of the
price changes in the economy that the Reserve Bank can influence when
it sets interest rates.  That is why we think it is still useful to
calculate (we suspect the RBA does too:  they want to prevent it rising
above 3.0%).

For your info, these are the recent inflation trends:

         Headline     Underlying
1999      1.1%          1.7
2000      3.2%          2.5

It gets even more complicated when the GST hits the data for the
September quarter, because we will then try to calculate headline
inflation excluding GST and underlying inflation excluding GST as
well.  Including GST, the headline rate will jump to around 6.5% on our
forecasts, when the Q3 figures are published in October.  Exciting
stuff!

:-)

James


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