Australia’s inflation posts steep rise in August

Sydney, Australia (4E) – Inflation in Australia made a huge leap in August — the highest increase in 17 months — based on a private measurement of inflation, suggesting that the Reserve Bank of Australia (RBA) may maintain interest rates at current levels.

August inflation increased by 0.6 per cent to 132.39, which is higher than July’s 0.2 per cent increase based on the monthly inflation measurement by TD Securities-Melbourne Institute. Compared to the same period last year, inflation for the month actually rose 2.2 per cent, breaching the lower end of RBA’s 2 to 3 per cent target for inflation.

It is the first time in six months that the inflation rise was within the RBA projection.

Higher prices in fruits, vegetables, fuel, alcohol, and tobacco were observed prompting the relatively high increase in inflation despite that prices in computers, services, travel and accommodation, audio visual, and footwear declined during the month.

Annette Beacher, TD Securities Asia-Pacific head of research said that prices for fruits and vegetables soared by 7.2 per cent and gas increased by 7.7 per cent in August. The underlying data, excluding volatile items and those preferred by the RBA, increased by just 0.16 per cent for the month.

Given the flat movement of prices of utilities in August, Beacher stated that the introduction of the carbon tax on July 1 did not seem to make any notable difference.

The central bank board is scheduled to meet on Tuesday and they are not expected to change the current cash rate that now stands at 3.5 per cent.

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