“Given our view that structural disinflationary forces have likely intensified in Australia, and the RBA’s revealed concern about the risk of persistent low inflation, we now look for another cut in August”, said Scott Haslem, an economist at UBS. “A cut following the one in May will improve affordability for existing and prospective home buyers”, he said. Hobart inflation came in at zero for the June quarter.
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The chances of the Reserve Bank of Australia (RBA) cutting interest rate became higher following the release on Wednesday of the country’s consumer price index (CPI).
The Reserve Bank of Australia’s trimmed mean was up 0.5 percent on quarter – topping forecasts for 0.4 percent and up from 0.2 percent in Q1.
Economists surveyed by Bloomberg were typically expecting an annual headline inflation rate of 1.1 per cent, with a quarterly figure of 0.4. The CPI is seen rising 0.4 percent in the second quarter, though the annual pace would still slow to 1.1 percent.
Headline inflation fell 0.2% in the first three months of the year, which invoked fears about a worsening deflationary spiral that eventually compelled the RBA to lower interest rates in May to new all-time lows. But domestic holiday travel and accommodation, telecoms and motor vehicle prices showed declines.
Medical and hospital services costs rose by 5.7 per cent, rents by 1 per cent and tobacco by 1.5 per cent.
The 3 key facts from the inflation data that can not be ignored are: 1.
Sydney, Adelaide, Perth, Darwin and Canberra came in at less than 1 per cent.
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An initial examination suggests that the June quarter result reflected the impact of the earlier fall in the Australian dollar which boosted tradables inflation (+0.6% q/q), albeit with an unusually long lag.
