Inflation at seven-year low
AUSTRALIA'S annual rate of inflation has slowed to a seven-year low as the downturn in the economy restrains price rises, a private-sector survey shows.
The TD-Securities/Melbourne Institute inflation gauge rose 0.4 per cent in June, following a 0.3 per cent fall in May and no change in April.
In the 12 months to June, the inflation gauge rose by 1.4 per cent - the lowest annual rate since the start of the series in mid-2002.
The annual rate in May was 1.5 per cent.
Annual inflation, as measured by the gauge, has been below the lower end of the Reserve Bank of Australia's (RBA) two to three per cent target range for inflation for the second consecutive month.
Price rises for private motoring, insurance services and fruit and vegetables were the major contributors to the overall change in June's result.
Falls in prices for books, newspapers and magazines, alcoholic drinks, meat and seafood’s helped offset some of the overall rise.
TD Securities senior strategist Annette Beacher said June's 0.4 per cent rise followed a three month period of prices falling by 0.4 per cent.
"The volatility is usual in monthly data, but the key takeaway from the inflation gauge is that inflation is low and falling and has further downside risks," Ms Beacher said in a statement.
"The collapse in inflation pressures is evident in the fact that in the nine months since September 2008, prices have risen by a grand total of 0.4 per cent which is an average of 0.04 per cent per month."
Ms Beacher said inflation would continue to be below the RBA's target range until at least mid-2010.
Australia's headline consumer price index (CPI) rose 0.1 per cent in the March quarter, for an annual rate of 2.5 per cent, the Australian Bureau of Statistics (ABS) said.
"As a result, the RBA board meeting tomorrow will no doubt discuss the case for an immediate interest rate cut," she said.
"On inflation grounds, the case is compelling, but as has been the case in recent months the RBA is placing a lot of faith in the momentum in China to drag Australia out of recession and this may see the RBA, yet again, defer the rate cut decision to the following month."
The Reserve Bank board will hold its monthly meeting on July 7. All 19 economists surveyed by AAP expect the RBA to leave the overnight cash rate at three per cent, a 49-year low.
Professor Don Harding, of La Trobe University Department of Economics and Finance, said there had been price rises in 30 spending groups and falls in 20 groups for a net balance of ten rises in June's survey.
"This measure of price pressure is consistent with the trimmed mean and ex-volatile measures of inflation, all of which suggest that core inflation is contained within the RBA target range," Professor Harding said.
Professor Harding said there was insufficient evidence of emerging inflation to consider lifting interest rates for now.
The ABS will release the CPI for the June quarter on Wednesday, July 22.
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