Inflation outlook remains subdued

Inflationary pressures picked up in the first quarter in Australia, with underlying inflation rising to the bottom of the RBA’s 2-3% target for the first time in two years. In contrast, core inflation in New Zealand slipped below the RBNZ’s 1-3% target for the first time since 2015. But we doubt this divergence is a sign of things to come. Indeed, we expect underlying inflation in both economies will struggle to get close to the middle of either central bank’s inflation target over the next few years.