Think twice before drawing comparrisons in NZ and Aussie CPI - ANZ

Analysts at ANZ explained that ahead of Australia’s inflation data (on 26 October) there can be a tendency to try and draw parallels with NZ CPI. 

Key Quotes:

"Some correlation is understandable − notably around tradable items such as fuel − with both economies price takers on the global stage. However, in both cases, the majority of the CPI basket is comprised of non-tradable items, which are influenced by domestic factors."

"Indeed, our analysis shows that while annual headline inflation is well correlated, the relationship weakens when looking at quarterly outcomes and core inflation. In addition, there is no consistent relationship with forecast ‘misses’. As such, we would caution against using the New Zealand CPI as a reliable guide to either the actual CPI print, or risks around the forecasts, for the Australian CPI."