MNI DATA IMPACT: Australia Inflation Up, But Outside RBA Range

By Lachlan Colquhoun

     SYDNEY (MNI) - Australia's headline inflation increased by 0.6% in the

second quarter and delivered an annualised figure of 1.6%, up from 1.3% in Q1.

This was slightly higher than the 1.5% anticipated by the market.

     Following are other points of interest in the release from Australian

Bureau of Statistics:

     Outside of the RBA target range

At 1.6% inflation is outside the Reserve Bank of Australia's target range of 2%

to 3% and seems destined to stay there for some time to come.

RBA rate decision next week

Today's release is the last piece of significant economic data before the RBA

Board meets to discuss policy options. After two consecutive cuts in recent

months lowered rates to a record low 1%, the RBA is widely expected to pause

next week. The Bank will welcome today's inflation result as moving in the right

direction, but it is unlikely to change its dovish stance in the short or medium

term, or the likelihood of another rate cut this year.

Fuel prices surprise 

After peaking in October 2018, fuel prices have subsided and weighed on last

quarter's CPI result, down 8.7% for the quarter. Prices at the pump have not

surged since then, but today's CPI result included a 10.2% increase in the price

of automotive fuels.

Drought impact

The ongoing drought in regional Australia has supported headline inflation, with

the price of vegetables up 7.7% last quarter. There are signs that this may be

abating, with the price of fruit down 4.1% in Q2.

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

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