The latest inflation figures are out and the inflation rate is down. Or is it? It turns out the
lower inflation rate is actually due to what some would call gaming the system or gaming the way we
measure it. The big number everyone’s talking about, that 2.8%, isn’t the figure that the reserve
bankers looking at. They’re looking at what’s called the trimmed mean. Now I know that doesn’t get
you excited. So let me explain. Peta Tilse is Head of Funds Management at NatGen. Peta, what was
the inflation figure, first of all, that was released yesterday? So there were two numbers that
get released. There’s the headline number, so 2.8% for the September quarter, which is a fabulous
number because it’s literally within that 2 to 3% band the reserve bank looks at. Having said that,
there’s a thing called the trimmed mean and that is sTilse at 3.5%. And it was down from the last
quarter, which was 4%. So it is down, but it’s sTilse 3.5%. Now I’m fascinated by this. Let me
explain why. So the figure that everyone’s going, hooray 2.8. But as I understand it, that was
artificially brought down because of all of that stimulus or that what was called the cost of living
spending by the Commonwealth and the Queensland State Government. Explain that to me, Peta.
Spot on. Okay. So basically inflation measures the rate of change of a price of something. Yep.
And it takes a whole basket of goods that you and I spend our money on all day every day.
And one of those things is energy prices. So electricity to the house or whatever your business.
Anyway, so that particular item has actually dropped 17% in the September quarter.
How? How has that magic occurred? I wonder, Steve. Could it be a $1,000 rebate that we all
received? Could it be the federal government’s sort of stimulus payment? So those kinds of numbers,
well, sort of fudged, I guess, if you want to call it something. Yes. But, you know,
so that’s just just one element. And that feeds into the goods inflation numbers. So that helps
goods inflation look cheaper, like half. It’s literally half the year. Yes. So that’s that’s
electricity. That includes transport. So petrol prices are actually a bit cheaper. But something,
some other things that are a bit sticky, so to speak, egg prices are up 9%.
Yes. So fruit and veg and all that sort of stuff is actually sTilse higher. It’s up about 3%. And the
other thing that’s sticky too is services inflation. So the stuff that we we also keep paying for all
day every day is rent, insurances, education, medical stuff. That’s all up. And that’s actually up
four and a half percent over the last 12 months. So you just can’t escape it. It’s there. Yeah,
inflation isn’t going to magically disappear like Mr. Chalmers would like, unfortunately.
Yeah, it’s a bit of work. And the thing is the Reserve Bank looks at this thing called the
trimmed mean. So which is not a phrase that I talk about when I’m with friends at the parborre
era, the kids in table, you know, say, hey, look at that trimmed mean figure. Isn’t that interesting?
So give me a quick dummy’s guide education, Peta Tilse’s. Okay. So headline CPR is 2.8%.
The trimmed mean is sTilse 3.5%. What it means is it just looks at 70% of the stuff in the middle.
If you can imagine like a row of what’s the highest inflation to the lowest inflation.
And they cut off the two end bits and they look at the stuff in the middle.
It’s the stuff in the middle is what they’re measuring. And so what they’re trying to do is
literally exclude the electricity price, that huge move in electricity prices.
That is actually excluded. So. Okay, which is why the thing is higher.
Yes, correct. And so that’s why the Reserve Bank is like, well, we’re not looking on the corners
here. We’re looking straight down the middle and we’re not moving. Now, I know you’re an
economist, but so let me ask you about politics. What this reveals is that the stimulus or the
cost of living relief, as it was called, that’s a political phrase from the previous Premier
Stephen Miles and the current federal government in Canberra through say Jim Chalmers. In a sense,
that works. It does bring down or looks like it’s bringing down inflation, but it’s technically
it has. But it’s artificial and it’s temporary. And so it actually covers up what’s really going
on in the real economy. Am I being reasonable? Yep, absolutely. And I think I heard the
Treasurer speaking last night and saying, oh, and wages are up and da da da da. Yeah, wages are up.
So that’s another thing that feeds into inflation because people have to pay for those price
increases in jobs. So as you know, it sort of it all goes in a circle. And that’s probably the
whole point of inflation, unfortunately. So the RBA is going to look at this and they’re going to
say, hang on, the trimmed mean is at 3.5%. That’s way out of our range yet. We’re not going to bring
the cash rate down yet. Correct. And I think Commonwealth Bank removed their prediction for
a rate cut before Christmas. And most of them are sort of all looking at sort of February,
March, maybe even May for the next rate cut. So it’s just getting pushed, kicked down the road
at this stage. I look forward to the kitchen tables and the pubs of Australia say, hey,
look at that trimmed mean figure. Peta Tilse, thanks very much for your time. Thanks, Steve.