Price Stability

Underlying v Headline Inflation

Prior to 1998, the ABS would generally publish two separate rates of inflation. The headline rate of inflation included a much broader range of goods and services, including some which were subject to wider price variations. Therefore at the time we had two separate goals for inflation.

Our aim was to have an average rate of inflation as measured by the headline rate of between 3% and 4%, while the goal for the underlying rate was to achieve an average rate of inflation of between 2% and 3%.

In 1998 the ABS changed the way in which the headline inflation rate is calculated. At that time, a number of volatile items were removed from the equation, and as such the headline rate is now closely aligned with the underlying rate.

As a result, the goals for the two separate rates of inflation are now the same – an average of between 2% and 3% per annum over the course of the business cycle. As the two rates are now so similar it is unusual for news publications to discuss the two rates separately. However, the RBA is still more interested in the outcome for the underlying rate, as this suggests changes to the structure of relative prices in Australia which will in turn affect resource allocation.

Current Page: Underlying v Headline Inflation 1 2 3 4 5 6 7 8 9 10 11 12

E-mail Mr Wood