What this measures
The inflation rate measures how fast consumer prices are rising, as the annual change in the Consumer Price Index (CPI). Tradergy shows the RBA’s year-ended CPI inflation series - the figure the Reserve Bank watches most closely when setting the cash rate.
How to read this figure
The basket is assembled for the household sector as a whole and fits no member of it. The Bureau of Statistics gives a concrete reason rather than a general disclaimer: it carries rents and the cost of buying a newly built dwelling at the same time, a combination no single household faces. Its scope is private households in the eight capital cities, which is also why the Bureau says the index "is not a measure of economy-wide inflation".
Two figures come out of the same release and they behave differently afterwards. The published index is close to final, revised "only in exceptional circumstances, such as to correct a significant error". The underlying measures are not, and the reason is mechanical rather than editorial. Both the trimmed mean and the weighted median are calculated from seasonally adjusted movements, and the Bureau adjusts this index concurrently, meaning the seasonal factors are re-estimated every month from all the data available at that point instead of being fixed once a year. Its own statement of the cost is direct: with concurrent analysis "the seasonally adjusted series are subject to revision each month as the estimates of the seasonal factors are improved". The patterns are reanalysed annually on top of that. So the measure followed most closely for the underlying trend is the one most likely to be restated later, while the headline that gets reported is the one that stands.
The figure reaches a household by two routes, and only one runs through interest rates. The familiar route is policy: the agreement between the Treasurer and the Monetary Policy Board sets a target of 2 to 3 per cent and directs the Board to set policy so that inflation is expected to return to the midpoint of that band. The direct route is indexation. A published index number is the thing contracts, thresholds and payments are adjusted by, which is why a quarterly series is still maintained specifically to support indexation and contracts. Where an agreement says an amount moves with the consumer price index, this is the number that moves it, whatever that household's own costs did.
One thing about the series shown here changed recently and is worth knowing. It is the quarterly index, and the quarterly index is no longer the headline measure, nor even separately collected: since the monthly series became complete, the quarterly figure has been derived from it by averaging. Whatever cadence a reader is used to for this statistic, the underlying collection is now monthly.
Longer read: How the trimmed mean and weighted median are built. Australia's underlying inflation measures do not exclude a list of volatile categories. They exclude positions in a distribution, recalculated every period, which is why nothing is permanently in or out of them.
Related indicators: Mean house price · RBA cash rate · Unemployment rate - or the whole set on the Australian economy hub. To put this figure to work on your own numbers, use the inflation calculator. For how figures like this feed into the exchange rate, read what moves the Australian dollar.