MNI DATA IMPACT: Aussie Inflation Picks Up In December

By Lachlan Colquhoun

     SYDNEY (MNI) - Australia's headline inflation increased by 0.7% in the

second quarter, delivering an annualised figure of 1.8%. This was slightly

higher than the 0.6% and 1.6% prints forecast by analysts.

Other points of note from the Australian Bureau of Statistics data release:

Implications for RBA rate decision.

At 1.8%, inflation is still outside the Reserve Bank of Australia's target range

of 2% to 3%, but the Bank will be pleased to see that it is now moving in the

right direction after a series of rate cuts last year. The RBA Board meets Feb.

4 and today's CPI data, combined with better than expected employment data last

week, have lowered market expectations that the Bank will cut rates again from

the current record low 0.75%. This is despite the economic impact of the

devastating bushfires and any impact from the coronavirus crisis.

Drought still a factor. 

The ongoing drought conditions in regional Australia continue to impact on the

price of a range of food products. Food prices increased 1.3% for the quarter

with pork prices spiking 4.7%. Fruit prices were up 6.8% for the quarter.

Tobacco taxes bite 

Australian public policy favours high taxes on tobacco, and prices continue to

rise on a quarterly basis. A 12.5% increase in the annual tobacco excise tax

impacted prices this quarter, resulting in a 8.4% price rise.

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

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

[TOPICS: MALDS$,M$A$$$,M$L$$$]