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[SYDNEY] Australian consumer prices rose slightly faster than forecast last quarter as the dissolution of Covid-19 subsidies and higher tobacco taxes had an oversized impact, but core inflation remained very subdued In fact, annual growth in the reduced average measure of underlying inflation stayed at a record low of 1.2 percent in the December quarter, a green light for the Reserve Bank of Australia (RBA) to keep policy super simple.
« The underlying weakness will persist for some time, despite the strength of the economic recovery so far. There is still work to be done before the labor market reaches full employment and pressure on wages increases again, » said Sarah Hunter, chief economist at BIS Oxford Economics .
« And the weakness is broad-based, with prices for clothing, housing, housewares and services excluding children care and communication have decreased. «
The RBA is aiming for a long-term inflation rate of 2-3 percent, but has been below the ground for five years and is expected to be absent until at least 2023.
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In light of this outlook, the bank has pledged to keep interest rates at the current record low of 0.1 percent for another three years while buying bonds to keep yields low.
The Data from the Australian Bureau of Statistics on Wednesday showed consumer prices (CPI) were 0.9 percent higher than forecast both quarterly and annually. Markets had targeted a 0.7 percent increase.
Part of the pickup came from childcare after the government handled a grant offered during the peak of the Covid-19 lockdown in April and May.
Due to higher taxes, tobacco prices also rose by almost 11 percent, which in turn was not a demand-driven move.
The effects of the virus were visible throughout the report. The cost of domestic vacations rose as the Australian states reopened due to lockdowns while housing and flow subsidies stood against inflation.
A shortage of overseas visitors and students coupled with a change in lifestyle toward single-family home purchases also resulted in rents barely rising after two-quarters of the falls.
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Ref: https://www.businesstimes.com.sg
