Australia Inflation (CPI)

Australia's inflation (CPI), or the Australian Consumer Price Index, is published by the Australian Bureau of Statistics (ABS) and is the most important data the country's central bank (RBA) looks at before its interest rate decision. The release comes out in the early morning hours Tehran time and is usually the most volatile moment for the Australian dollar in the Asian session. At the top of this page you can see the next release time with a countdown, the latest actual figure, the forecast and the previous figure, plus the history of annual and monthly inflation from official ABS data. This guide explains how to read these numbers and what sets Australian inflation apart from similar releases in other countries.

What does Australia's CPI measure?

CPI shows the change in the prices of a basket of goods and services that Australian households buy: food, housing, transport, education, health, recreation and dozens of other items. When this index rises, it means the purchasing power of money has fallen. The Reserve Bank of Australia has set its inflation target at 2 to 3 percent a year and tries to keep inflation near the middle of this range. To learn how inflation feeds through to currencies, gold and stocks, read the article the impact of inflation on financial markets .

From quarterly to monthly inflation

For years Australia was one of the few major economies that published its headline inflation figure quarterly, while the US, the UK and Canada report inflation monthly. A monthly indicator was also published alongside the quarterly figure, but it did not price every item in the basket each month and the market considered it less reliable. The ABS has dropped this approach and now publishes a complete monthly CPI, which is the main measure of inflation. This has a few implications for you:

• Australia's inflation release now comes every month, and the market updates its expectations for the RBA decision every month.
• Quarterly headlines such as CPI q/q belong to the old method; compare the new figures with them carefully.
• The chart and history table on this page are built from the official ABS monthly series.

Australia inflation release time in Tehran time

The ABS publishes its data at 11:30 a.m. Canberra time, and each month's figure arrives about four weeks after that month ends. Because Australia is in the Southern Hemisphere, its daylight saving time runs opposite to Europe and the US: roughly from early October to early April the release comes out around 4:00 a.m. Tehran time, and for the rest of the year around 5:00 a.m. The countdown at the top of the page shows the exact time of each release. During these hours only the Sydney and Tokyo sessions are open; see the order of sessions on the global market hours page.

Annual, monthly and Trimmed Mean figures: which matters more?

Several figures come out at the same time in each release, and each one tells you something different:

Figure	What it tells you	Note for traders
CPI y/y (annual)	Change in prices compared with the same month a year earlier	The main headline; compared with the RBA's 2 to 3 percent target
CPI m/m (monthly)	Change compared with the previous month	More volatile; fuel or travel prices can move it
Trimmed Mean (core inflation)	Average price change after removing the sharpest increases and decreases	The measure the RBA watches for the underlying inflation trend

If the annual figure comes in above forecast but the Trimmed Mean is in line with expectations, the market usually reacts less, because the jump may have come from a few temporary items. Conversely, a surprise in core inflation often shifts the market's expectations for the Reserve Bank of Australia interest rate decision more seriously.

How the Australian dollar and other markets react

Higher-than-forecast inflation raises the likelihood of higher interest rates and usually strengthens the Australian dollar; a lower figure has the opposite effect. You see the biggest reaction in the AUD/USD currency pair and cross pairs such as EUR/AUD. But the Australian dollar is a commodity currency and is also sensitive to raw material prices, Chinese economic news and risk sentiment in global markets; so sometimes outside news dampens the reaction to inflation. The key difference from US inflation is that US CPI moves the dollar, gold and indices around the world, while the impact of Australian inflation stays mostly limited to the Australian dollar and its pairs.

Practical tips for trading during the release

1. Liquidity is low in the early morning hours, and brokers widen the spread before the release; the cost of entering at this moment is higher than usual.
2. If you have an open position on the Australian dollar and will be asleep, review your stop loss and position size before the release.
3. Set your position size with the trader's calculator so that even if price gaps, your loss does not exceed your risk limit.
4. Don't rely on the monthly figure alone; look at the annual figure and core inflation together.
5. Check the economic calendar to make sure there is no other major news for AUD or USD on the same day.

This page is for information only and is not a recommendation to buy or sell.