Australia | Apr 02 2007
By Rudi Filapek-Vandyck
The TD Securities/Melbourne Institute Monthly Inflation Gauge rose 0.5% in March following a 0.2% rise in February. Over the twelve months to March, the TD/MI Inflation Gauge has now risen by 3.5%.
TD Securities/Melbourne Institute report that not only has year-ended inflation accelerated for the last two months, it has remained above the top end of the Reserve Bank of Australia’s target range since March 2006.
Contributing most to the overall increase in the Inflation Gauge in March were rises in the automotive fuel (up 9% in March), alcohol and tobacco, and transportation. Price decreases in dwelling rent after sharp rises in previous months together with price decreases for household contents and services, and books, newspapers and magazines partially offset these increases.
The trimmed mean of the TD/MI Inflation Gauge, a measure of underlying inflation, rose 0.3% in March, following a 0.3% rise in February. The trimmed mean rose by 3.3% over the year to March 2007.
Joshua Williamson, Senior Strategist at TD Securities, points out that inflation pressures remain acute in Australia. He believes the odds therefore favour the RBA hiking interest rates this week.
Commenting from London, Stephen Koukoulas, Global Strategist at TD Securities and co-creator of the Inflation Gauge believes that “Unless inflation pressures start to abate soon, the RBA may be forced to hike more than once over the next few months.”
Prices rose in 26 expenditure classes, fell in 16 and remained unchanged in 48 expenditure classes for a net balance of 10 price rises, an indication inflation remains broadly based.