Australia | Oct 02 2009
/>By Chris Shaw
Inflation continues to not be a threat to the Australian economy as the TD Securities – Melbourne Institute Monthly Inflation Gauge for September showed an unchanged reading fom the August result, meaning the annual pace of inflation growth as measured by the Gauge has fallen to 1.3% from 1.7% in August as a stronger outcome from last September drops off.
Despite the fall, Westpac senior economist Anthony Thompson notes the spike in July, when the Gauge jumped 0.9%, means three month growth of 0.86% is well above the three month outcome for June of 0.13%, which supports the bank’s view headline inflation in the third quarter will be considerably higher than for the second quarter.
Sources of higher prices in the month include furniture and furnishings, holiday travel and accomodation and books, newspapers and magazines, but as Thompson notes these were offset by lower prices for audio, visual and computing equipment, fruit and vegetables and private motoring. The big contributor to the latter was a fall in petrol prices.
Tradeable prices also fell, reflecting low global inflationary pressures, which in combination with the stronger Australian dollar are pushing down the prices of imported goods.
Overall prices rose for 25 items but fell for 16 and were steady across 49 items. The net increase of nine items was down from 13 in August and 20 in July, Thompson noting this suggests a further easing in the breadth of price pressures throughout the economy.
This puts inflation below the Reserve Bank of Australia’s (RBA) target band of 2-3%, which according to TD Securities senior economist Annette Beacher suggests there is no immediate reason for the RBA to tighten monetary policy by lifting interest rates when it meets next week. Economists have a similar view, with the consensus forecast being for no change to the cash rate of 3.0%.
On the back of the data the Melbourne Institute estimates the official CPI will rise by 1.3% in the September quarter, which would push the annual pace of CPI inflation up to 1.6% compared to 1.5% in the second quarter. Thompson’s preliminary forecast is for an outcome of 1.0% for the quarter against 0.5% previously, which would bring the annual rate to 1.3% from 1.5% previously.