The Week in Charts

Inflation. It's never really dead. But sometimes it sleeps for long periods. This week's Australian inflation indicators signalled very little to worry about.

Car prices fell to their lowest in 15 years.

Clothing prices have also sunk to very low levels - Clothing and footwear had a record drop of -2.1% over the last year.

But Australia is never isolated from global economic trends and the revaluation of the Chinese Yuan last week is set to trigger a new alignment in global economics. The first outcome is an appreciation of the Chinese currency.

Source: Bridgewater Associates

China's scrapping of its currency peg with the US has put upward pressure on US inflation. For a start it means that US import prices of Chinese manufactured goods are now set to rise. US imports from China have risen from 2% to 12% of total US imports over the last decade.

Source: ABN AMRO

The new currency arrangements set by the Yuan revaluation also means that the Chinese will buy less US bonds causing US bond prices to fall. This will lead to a rise in yields in US bonds - the world's biggest bond market.

Rising US bond yields will trigger a rise in global bond yields which is very bad news for Australia 'yield' stocks that act as a proxy for bonds to local investors. Among the key yield stocks are the banks and Telstra which continues to languish at $5 for several years.

Source: ASX