Australia's June CPI prints at 5.60% from 6.83%, but still shows Australian consumers are being taxed out by higher food/housing/rents. Recession on the horizon? RBA may increase rates at their next meeting, on higher energy prices.

Chart 1

Chart 2

Australia is still eyeing a nasty recession/inflation shock, as the Consumer Price index came in at 5.60% from a market consensus of 6.1% from May's CPI at 6.83%.  But, it is the distortion in both a higher employment rate and, for arguments sake lower and/or suppressed natural gas prices (Chart 1), does not pronounce a deflationary recession.  The Australia government is about to reveal a record account surplus which, as the late economist Milton Friedman decreed has been achieved by inflation, as that hidden tax on the consumer.  For more information on inflation and higher tax revenue/credit for governments, please refer to this link: taxfoundation.org/tax-basics/inflation/ 

The concern with what might appear that CPI's globally maybe falling at a rapid rate from their 2022 highs, is solely on the back of energy prices coming down or have been suppressed by energy caps/oil releases.  This simply cannot last for ever, nor can high employment rates.   At some point the energy prices will spring back with unemployment rising.

Chart 2 shows the collapse of the Australia Dollar (AUD) after the inflation figures, and it must be noted that it was Fuel prices, down -8.0% that offset a rise in housing (+8.4%), Food and non alcoholic beverages (7.9%).   If the Reserve Bank of Australia does pause, it would only further imbed inflation and risk losing control (again) when energy prices shoot upwards (again). 

The AUD risks falling further, when the Federal Reserve increases rates in July after their June pause.