MNI 5 THINGS. Australia Quarterly CPI Higher, Year/Year Dips

--Headline Annual Inflation Still Below Lower End Of RBA Target Range

By Lachlan Colquhoun

     SYDNEY (MNI) - Australia's Consumer Price Index rose modestly in the fourth

quarter of 2018, although year on year data was modestly lower, the latest data

released by the Australian Bureau of Statistics showed.

     Here are five points of interest from the data:

     Quarterly data higher, but annual inflation lower. Headline inflation

increased 0.5% in the fourth quarter of 2018, beating expectations and higher

than the 0.4% posted for Q3. In annual terms, however, inflation is now running

at 1.8% against 1.9% in the previous quarter.

     Under the RBA target range. The Reserve Bank of Australia's target range

for inflation is between 2 and 3%. If inflation edges back into that range, the

bank has said it would consider an interest rate hike. Markets had been

expecting an annual inflation figure today of around 1.7%, with some analysts

forecasting a number as low as 1.5%. The fact that annual inflation fell, but

not by as much as expected, plays both to the script of the RBA and those

outside the bank advocating a cut in official interest rate cuts. Those in

favour of a rate cut will point to the core inflation figure of 1.7%, which

strips out volatility, as supporting their view. The RBA maintains its stance

that the next move in interest rates will be up, although saying such a move is

unlikely in the short and medium term. More about the RBA's outlook will be

known from the Feb 4 interest rate decision and the Statement on Monetary Policy

which follows on Feb 8.

     Dollar in slight rebound after selloff. The Australian dollar fell in

Tuesday trading in advance of the inflation data release on expectations of a

lower number. After reaching A$0.7140 cents in late London trade the Aussie unit

rebounded slightly on the data to A$0.7200 cents, before dipping again to

A$0.7180.

     Smokers hard hit. Government taxes sent tobacco prices soaring by a 9.4%

for the quarter, while domestic holidays and accommodation spiked 6.2%. The

ongoing drought and seasonally availabilities continue to impact on grocery

prices, with the price of fruit increasing by 5%

     Fuel prices lower. Fuel prices rose sharply in October 2018 but fell hard

in the last two months of the year. For the final quarter, automotive fuel

prices fell 2.5% after rising 1.4% in Q3.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

--MNI Sydney Bureau; +61 405322399; email: lachlan.colquhoun.ext@marketnews.com

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