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178317
Wed, 04/27/2011 - 14:19
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http://m.oananews.org//node/178317
The shortlink copeid
Prices accelerate in wake of disasters
The size of the jump in consumer prices in the March quarter may well have raised a few eyebrows at the Reserve Bank of Australia (RBA), and economists believe it makes an interest rate rise this year more likely.
A spike in consumer prices in the wake this summer's natural disasters had been well flagged by both the federal government and the RBA.
But the 1.6 per cent rise in the consumer price index (CPI) in the first three months of this year, and an average rise of 0.85 per cent in the more crucial underlying measures of inflation, were well above economists expectations.
The RBA has repeatedly said it would look through the anticipated price spike, while Treasurer Wayne Swan said the result was "unsurprising" given the impact of the floods and Cyclone Yasi on fresh fruit and vegetables, including a 100 per cent jump in banana prices.
"We can take some comfort that in coming quarters we will see some of these price increases unwind as crops regrow and production returns," Mr Swan told reporters in Canberra on Wednesday.
But economists say it is a clear sign that the downward trend in inflation has now run its course.
National Australia Bank (NAB) senior economist Spiros Papadopoulos says that with the unemployment rate already at a lowly 4.9 per cent and wage pressures rising, the economy is just "one bad" CPI away from an interest rate rise hike.
"If the economy strengthens over coming quarters, then the (RBA) will be unable to resist a further rate hike," said Mr Papadopoulos, who expects a move in August.
The 1.6 per cent rise in the March quarter CPI was the fastest acceleration in prices in nearly five years and took the annual rate to 3.3 per cent, above the central bank's two to three per cent target.
Still, despite a large quarterly rise, annual measures of underlying inflation - which have more influence on monetary policy thinking at the RBA and strip out volatile price swings in prices - averaged a more benign 2.25 per cent.
This was only a shade above the 2.2 per cent in the year to December.
"What that does mean is underlying inflation is under control," Mr Swan declared.
Mr Swan said the figures highlighted the importance of getting the settings right in next month's budget to avoid compounding the inevitable price pressures when the mining investment boom "hits top gear".
But opposition treasury spokesman Joe Hockey said the government had failed to address the core challenges facing the economy.
"They talk about increasing the productive capacity of the economy but they don't do anything about it," Mr Hockey told reporters in Sydney.
He said former prime minister Kevin Rudd had declared war on inflation with a five-point plan, but that had not been delivered.
"If it had been delivered, the inflation figure out today would be much lower and Australia would have the capacity to be able to deal with trend growth," he said.
Fruit and vegetable prices jumped 15.3 per cent in the March quarter contributing 0.4 percentage points to the CPI outcome.
A spike in global oil prices also fed into higher fuel prices, rising 8.8 per cent in the quarter and adding around 0.3 percentage points to inflation.
There were also large, seasonally increases in both health and education prices, the Australian Bureau Statistics said.
A spike in consumer prices in the wake this summer's natural disasters had been well flagged by both the federal government and the RBA.
But the 1.6 per cent rise in the consumer price index (CPI) in the first three months of this year, and an average rise of 0.85 per cent in the more crucial underlying measures of inflation, were well above economists expectations.
The RBA has repeatedly said it would look through the anticipated price spike, while Treasurer Wayne Swan said the result was "unsurprising" given the impact of the floods and Cyclone Yasi on fresh fruit and vegetables, including a 100 per cent jump in banana prices.
"We can take some comfort that in coming quarters we will see some of these price increases unwind as crops regrow and production returns," Mr Swan told reporters in Canberra on Wednesday.
But economists say it is a clear sign that the downward trend in inflation has now run its course.
National Australia Bank (NAB) senior economist Spiros Papadopoulos says that with the unemployment rate already at a lowly 4.9 per cent and wage pressures rising, the economy is just "one bad" CPI away from an interest rate rise hike.
"If the economy strengthens over coming quarters, then the (RBA) will be unable to resist a further rate hike," said Mr Papadopoulos, who expects a move in August.
The 1.6 per cent rise in the March quarter CPI was the fastest acceleration in prices in nearly five years and took the annual rate to 3.3 per cent, above the central bank's two to three per cent target.
Still, despite a large quarterly rise, annual measures of underlying inflation - which have more influence on monetary policy thinking at the RBA and strip out volatile price swings in prices - averaged a more benign 2.25 per cent.
This was only a shade above the 2.2 per cent in the year to December.
"What that does mean is underlying inflation is under control," Mr Swan declared.
Mr Swan said the figures highlighted the importance of getting the settings right in next month's budget to avoid compounding the inevitable price pressures when the mining investment boom "hits top gear".
But opposition treasury spokesman Joe Hockey said the government had failed to address the core challenges facing the economy.
"They talk about increasing the productive capacity of the economy but they don't do anything about it," Mr Hockey told reporters in Sydney.
He said former prime minister Kevin Rudd had declared war on inflation with a five-point plan, but that had not been delivered.
"If it had been delivered, the inflation figure out today would be much lower and Australia would have the capacity to be able to deal with trend growth," he said.
Fruit and vegetable prices jumped 15.3 per cent in the March quarter contributing 0.4 percentage points to the CPI outcome.
A spike in global oil prices also fed into higher fuel prices, rising 8.8 per cent in the quarter and adding around 0.3 percentage points to inflation.
There were also large, seasonally increases in both health and education prices, the Australian Bureau Statistics said.
