Australia | Dec 06 2010
By Rudi Filapek-Vandyck
Experts' views on global inflation have pretty much centred around higher food prices in China, wages pressures in Australia and the absolute lack of inflation in Europe and the US. The latest independent survey into inflation in Australia, however, suggests the case for global inflation is not that simple and not that clear cut. The november inflation gauge by TD Securities and the Melbourne Institute suggests inflation remains on an accelerating upward path in Australia, and rising prices for fruit and vegetables were among the main culprits, together with "communication" and rising rental prices.
The TD Securities–Melbourne Institute Monthly Inflation Gauge rose by 0.4% in November, after a 0.3% rise in October and a 0.1% rise in September. In the twelve months to November, the Inflation Gauge has now risen by 3.9%, following a 3.8% rise for the twelve months to October. Economists at TD Securities report November marks the fourth consecutive month that the gauge has been at or above the 3% upper band of the RBA's inflation target.
Contributing most to the overall change in November were price rises for fruit and vegetables and communication. These were offset by falls in prices for audio, visual and computing, holiday travel and accommodation, and meat and seafood. The price of automotive fuel increased marginally, while rents increased by 0.6%, the highest monthly increase since May.
The trimmed mean of the Inflation Gauge rose by 0.3% in November, following 0.2% increase in October. In the twelve months to November, the trimmed mean rose by 3.0%. TD Securities notes November is the second consecutive month that underlying inflation is at or above the upper band of the RBA target.
Annette Beacher, Head of Asia-Pacific Research at TD Securities, is quoted in the press release as saying: "Our TD-MI monthly Inflation Gauge gave the correct signal that inflationary pressures remained contained in the September quarter, but this goldilocks story is fast losing relevance. Now we have two months of evidence that upside inflation pressures have emerged in the final months of 2010. Our preliminary calculations suggest that headline inflation rose 0.9% for the December quarter, or 3.2% higher than a year ago, and underlying inflation rose 0.8% in the quarter, for an annual rate of 2.6%.”
“As the RBA took a pre-emptive stance against future inflationary pressures by shifting to a restrictive monetary policy stance last month, we expect the RBA to remain on the sidelines for the next few months. However, with inflationary pressures already building, the next move remains up for interest rates in Australia. While we cannot rule out a 25 basis point increase to 5% in Q1 2011, allowing for the RBA’s "flexibility" now it has achieved restrictive monetary policy, means this timing can easily slip into April or May without compromising the Bank’s anti-inflation credentials”.
