26 Jul 2018

The headline inflation rate for the June Quarter was 0.4% and 2.1% for the 12 months. This rate is often of little interest to investors, as most leases use the 'Sydney All Groups' figure. Very unusually, this figure is the same as the headline rate for this period.

The most significant increase was in petrol (up 8.3%). Automotive sales dropped 2.9% (sorry dealers!). 
Overall intense competition, particularly in groceries, has kept the rise in inflation minimal. Around the world though, inflation and interest rates are starting to rise. In Australia, some term deposits have risen around 0.25%, despite there being no change in official rates.

There is nothing in the short term likely to increase inflation. Future causes are many, but may include a reduction in competition, the ending of the drought, which will see food prices increase as farmers restock, or a large shift in the exchange rate.

The take home message for investors entering new leases, is not to rely solely on the CPI for increases and to make sure increases in outgoings are recoverable.