SYDNEY: Australian inflation came in at 0.5 per cent in the three months to June, official figures showed Wednesday, giving the country’s central bank room to keep interest rates at a record-low to support the economy.
The consumer price index (CPI) had lifted 0.6 per cent in the previous quarter, the Australian Bureau of Statistics (ABS) said.
The latest figures took the annual rate of inflation to 3.0 per cent, up from 2.9 per cent in the year to March, but within the Reserve Bank of Australia’s target range of 2.0-3.0 per cent.
The Australian dollar, which was trading at 93.93 US cents Tuesday, slipped briefly before surging to 94.35 US cents.
The ABS data was in line with market expectations of an increase of 0.5 per cent quarter-on-quarter and 3.0 per cent over the year.
“We view today’s outcome, and the inflation outlook more broadly, as neutral for monetary policy,” ANZ’s senior economist Riki Polygenis said.
“It does not appear weak enough to justify a rate cut. Equally, it implies little urgency for the RBA to wind back very expansionary monetary policy.” The inflation levels were driven by a rise in health insurance, cigarette prices, new housing, furniture and international travel.
Moving in the opposition direction were petrol prices, domestic travel and telecommunication equipment and services costs.
Underlying or core inflation, which strips out volatile items and is more closely watched by the Reserve Bank, rose 0.7 per cent for a year-on-year rate of 2.8 per cent.
Barclays’ chief economist for Australia Kieran Davies said the figures were broadly similar to the RBA’s forecasts and its focus now turns to June retail sales numbers, which come out next month.
“The retail sales number will be important because we’ve had weakness there recently and we had that big drop in consumer confidence from the budget, although the weekly consumer confidence numbers have shown a rebound,” Davies told AFP.
Analysts had cautioned that the tough May federal budget, which cut back on government welfare and spending, could lead to consumers tightening their purse strings.
Davies said the RBA has also been frustrated by the recent strength of the Australian dollar, which the central bank said weighs on economic growth.
The central bank has left the cash rate on hold at 2.5 per cent since cutting it by 25 basis points in August as the economy transits away from an unprecedented boom in the mining sector. — AFP