Australian annual inflation figure has come in at only 3.1 per cent, making another interest rate rise next month less likely.
The consumer price Index headline rate for the past June quarter was 0.6 per cent, but the headline rate for the past year was 3.1 per cent, significantly under the expected rate of 3.4 per cent.
Given the CPI figures there seems to be little reason for the RBA to move on rates next week. This is especially true given that the country is in the middle of an election campaign.
The cost of living is proving to be very significant to the outcome of the Australian voter.
The inflation news are very positive for all home owners with a mortgage.
It now looks more likely that RBA will not lift rates until the end of 2010. Of course this will not necessarily prevent other lenders from lifting rates independently of the RBA.
“Certainly home buyers will be happy, politicians will heave a sigh of relief they won’t have to focus on interest rates in this election campaign.
“The government’s probably got more reason to cheer than the Opposition, but that’s the way things go.”
The lower than expected CPI is not such a surprise given the difficult trading conditions being experienced by most retailers.
One of the largest contributors to the headline CPI figure was a 5.9 per cent rise in tobacco and alcohol prices, for an annual rise of 8.7 per cent.
This was the result of the Federal Government’s 25 per cent tobacco excise, introduced earlier in the year, Mr James said.
JP Morgan economist Helen Kevans said both headline and core inflation came in below expectations, “so that’s definitely reducing the chance of an RBA rate hike next week”.
The median market forecast was for the headline CPI to have risen by 1 per cent in the June quarter.
The Australian Bureau of Statistics data shows the CPI rose 3.1 per cent through the year to the June quarter.
The biggest price rises in the quarter were for tobacco, surging 15.4 per cent, hospital and medical services, rising 3.8 per cent, and automotive fuel, up 2.1 per cent.