RBA's fight against inflation hampered by quarterly CPI reporting

• Australia is one of only few advanced economies reporting CPI quarterly.
• RBA, government and businesses need access to more timely inflation data.
• CPA Australia calls on government to move to monthly CPI reporting.

Today’s interest rate decision by the Reserve Bank of Australia (RBA) highlights a major flaw in the way Australia reports inflation. The solution, according to Australia’s leading professional accounting body, CPA Australia, is to move to monthly inflation reporting.

The Consumer Price Index (CPI) is one of the key statistics upon which the RBA bases its interest rate decisions. Australia reports CPI quarterly, unlike most advanced economies which report CPI monthly.

“In reaching today’s decision, the RBA has relied on CPI figures for the March quarter,” said Senior Manager Business Policy at CPA Australia, Gavan Ord. “These are the same figures it relied on to raise interest rates by a quarter of a per cent in May; and will be the same figures it relies on at its July meeting. 

“Because Australia only reports CPI data quarterly, we have a limited understanding of the impact May’s interest rate rise had on inflation. By contrast, the US Federal Reserve, the European Central Bank, the Bank of Japan and the Bank of England, for example, all have access to data within weeks of making a decision. 

“Current indicators point to inflation having continued a sharp upwards trajectory; and we support today’s decision. With inflation at a twenty year high, the RBA couldn’t afford to wait until June quarter CPI figures are released in late July, before acting.

“However, if the RBA had access to monthly CPI figures, like most advanced economies, it would be in a much better position to form a view and respond effectively. This would also give governments, businesses, and other organisations more timely and accurate information to influence financial decisions.” 

CPA Australia is calling on the government to increase the frequency of CPI reporting to monthly.

“We’re in a high inflation environment; we need to be agile. This necessitates a degree of urgency to this proposal. Relying on quarterly CPI data when the rest of the world gets it monthly, is like waiting at your letterbox for updates when your neighbour gets them on their phone.”

“Moving from quarterly to monthly reporting may require an increase in funding for the Australian Bureau of Statistics, which collects CPI data. However, we believe the benefits far outweigh the costs. We’re asking the government to implement this proposal as part of its first budget later this year.

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