Forecasting Australian CPI using ARIMA models

This research uses annual time series data on CPI in Australia from 1960 to 2017, to model and forecast CPI using the Box – Jenkins ARIMA technique. Diagnostic tests indicate that the A series is I (1). The study presents the ARIMA (1, 1, 0) model for predicting CPI in Australia. The diagnostic tests further imply that the presented optimal model is stable and acceptable. The results of the study apparently show that CPI in Australia is likely to continue on an upwards trend in the next decade. The study basically encourages policy makers to make use of tight monetary and fiscal policy measures in order to control inflation in Australia