Australia | Feb 02 2009
By Rudi Filapek-Vandyck
The TD Securities-Melbourne Institute Monthly Inflation Gauge rose by 0.8% in January, following a 0.2% fall in December and a 0.6% fall in November. In the twelve months to January, the Inflation Gauge has now risen by 2.7%. The economists note this is the third consecutive month the yearly inflation gauge has been within the Reserve Bank’s target range of 2-3%.
Contributing most to the overall change in January were price rises for domestic holiday travel and accommodation, utilities, pharmaceuticals and urban transport. These price rises were partially offset by price falls for non-alcoholic drinks and snack foods, bread and cereal products, and audio, visual and computing equipment. The price of fuel was 0.4% higher in January and is now approximately 26% below its level a year ago. The price of rent rose by approximately 1.5% in January, and is almost 15% above its level of January 2008.
Joshua Williamson, Senior Strategist at TD Securities, believes the rise in prices in January follows three consecutive months of price falls and probably reflects data volatility rather than a change in inflation momentum. He says there is some evidence there were one-off or once a year price increases for utilities and urban transport fares in January and these are unlikely to be repeated in coming months.
Williamson does not believe the January inflation result will discourage the RBA from cutting the cash rate by 100 basis points at its Board meeting tomorrow.