Australian inflation blows out to 4% year-on-year, no longer embedded, it is actual inflation on the incline. The AUD is too low at an average of 0.68 cents, while energy inflation is being imported. The Reserve Bank of Australia will lift interest rates at their next meeting.

 

Australia's consumer inflation surged year on year from May 2023 to May 2024, rising to 4% from 3.6%.  This is not embedded inflation, but an actual spike in inflation that is not surprisingly from housing/rents and food.  Which should have been contained a year ago, and governments are not to blame per se, more so the Reserve Bank of Australia, who have sat on relatively low rates in lieu of the worst inflation over 40 years.  Australia's interest rate is far too low at 4.35%.

Please note the chart above, showing the Australian Dollar at 0.66 cents to the U.S. Dollar, and on a Three Month average 0.68 cents.  Australian 10YR and 2YR  bond yields are at: 4.41% (white line 10YR) and 4.29% (yellow line 2YR).  Below pane (blue line) is the Moving Average on the AUD which is falling.

Meaning?  Allowing the AUD to stay in a below average trading range at 0.68, comparable to inflation is bad Central Bank and government policy, if it was to encourage export markets (Australia mining sector) at the expense of the consumer.  The AUD should be above 0.70 to tighten up liquidity.  Obviously this has not happened.

Also, note Australia is a net importer of oil, which is at a premium due to geopolitical.   So, low AUD = higher fuel costs.

The Australian Central Bank will have to increase rates at their next meeting.  

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All AUD analysis and commentary on CHIASMUS, please refer: chiasmusmagazine.blogspot.com/search?q=AUD