Inflation turned out a smidgin faster than expected in the December quarter, leaving the decision on monetary policy next Tuesday finely balanced.

The consumer price index (CPI) rose by 0.5 per cent in the December quarter after an increase of 1.0 per cent the quarter before, the Australian Bureau of Statistics said on Wednesday.

The annual inflation rate, which had declined every quarter since peaking at 5.0 per cent in the year to the September 2008 quarter, picked up to 2.1 per cent from the 10-year low of 1.3 per cent previously.

The Reserve Bank of Australia (RBA) monitors two measures of underlying inflation, which cut through quarterly volatility to give a better guide to the current inflationary trend.

Those two measures posted quarterly increases averaging 0.65 per cent, with annual underlying inflation of 3.4 per cent on average, the slowest for just over two years.
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Underlying inflation is expected to have eased slightly in the December quarter but the Reserve Bank of Australia (RBA) will raise interest rates again, economists say.

The December quarter CPI, due on Wednesday, will impact the central bank’s February 2 board meeting - at which most economists are forecasting a fourth consecutive upward movement.

The CPI, which is the key measure of inflation, is expected to have risen by 0.4 per cent in the December quarter for an annual pace of 2.3 per cent, according to an AAP survey of 13 economists.

The CPI rose by 1.0 per cent in the September quarter for an annual reading of 1.3 per cent from a year earlier, the Australian Bureau of Statistics said in October.

The market expects a 25 basis point (quarter of a percentage point) rise in the cash rate which now sits at 3.75 per cent after three consecutive rate hikes in October, November and December lifted it off a 45-year low of 3.0 per cent.
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Strong demand for housing amid a growing population and record low levels of property construction will help to tighten rental markets considerably, pushing rents higher in 2010 and beyond, a report says.

BIS Shrapnel’s latest Residential Property Prospects report found rents are expected to rise by an average of 5.8 per cent a year over the next three years.

This compares with a 5.7 per cent increase in 2009 and an average annual rate of 4.4 per cent between 2002 and 2008.

If realised, the anticipated rental increases would result in landlords pocketing an extra $1.9 billion in rents between 2010 and 2012.

BIS Shrapnel senior economist Jason Anderson said the supply of housing had “plunged” while demand remained very strong.
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The inflation rate was 1.3 per cent in the past year - unless you’re an age pensioner, in which case it was 2.4 per cent, official figures show.

In the past five years, the consumer price index (CPI) has risen by 16 per cent, but most age pensioners would not be surprised to find official figures confirm their cost of living is rising faster.

The CPI is generally seen as a good yardstick for measuring the cost of living.

And it is, on average, at least for households located in the state and territory capitals where the Australian Bureau of Statistics (ABS) collects its raw CPI price data.

Most households derive their income primarily from wages, so it should be no surprise that the cost of living index for such households has risen by about the same margin as the CPI over the past five years.
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Underlying inflation is heading lower, but that won’t stop interest rates from heading higher.

The best guess of the Reserve Bank of Australia (RBA) is that the economy will grow at about its long-term average pace through next year and accelerate beyond that in 2011, despite an assumed rise in the cash rate factored into its forecasts.

At the same time, the central bank expects inflation - gauged by the underlying measures it constructed for the purpose of identifying the trend hiding among the random ups and downs - to decline.

The latest consumer price index (CPI) figures from the Australian Bureau of Statistics (ABS) show that is happening.
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Inflation is expected to have eased slightly in the September quarter, but will still leave scope for the central bank to raise interest rates by as much as half a percentage point, economists say.

The September quarter consumer price index (CPI) report, due on Wednesday, is expected to take centre stage ahead of the Reserve Bank of Australia’s (RBA) board meeting on November 3 - Melbourne Cup day.

ICAP senior economist Adam Carr says an elevated reading or upside surprise raises the prospect of a more aggressive 50 basis point move.

The market has already fully priced a 25 basis point rise in the cash rate, which now sits at 3.25 per cent after the RBA raised the rate from 3 per cent earlier this month.
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Producer price index (PPI) figures show stalling domestic price pressures and falling import prices and hint at some risk that the consumer price index (CPI) on Wednesday is more likely to undershoot forecasts than to overshoot.

The PPI for final goods and services fell by 0.8 per cent in the June quarter, the Australian Bureau of Statistics said on Monday.

It was the biggest fall in the decade history of the PPI data series and brought the annual inflation rate by this measure to 2.1 per cent over the year to June, the slowest for five years, from 4.0 per cent three months earlier and 6.4 per cent three months before that.

The price of final domestically produced goods and services was unchanged in the quarter, after falling in the previous two, while the index for final import prices were down by 5.9 per cent after three consecutive rises.
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Consumer prices are likely to have risen modestly in the June quarter following hikes in health insurance premiums and higher rents and petrol prices.

But the annual rate of inflation is expected to ease, giving the Reserve Bank of Australia (RBA) room to cut official interest rate cuts again if it believes the economy needs a further boost.

The headline consumer price index (CPI), the key measure of inflation, is expected to have risen by 0.5 per cent in the June quarter for an annual pace of 1.5 per cent, an AAP survey of 16 economist forecasts shows.

In the March quarter, the headline CPI rose 0.1 per cent for an annual rate of 2.5 per cent.
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The biggest quarterly fall in inflation for more than a decade opens the way for another big interest rate cut to help kick-start the struggling economy, economists say.

Headline inflation, as measured by the consumer price index (CPI), fell 0.3 per cent in the December quarter, the Australian Bureau of Statistics said on Wednesday.

This was the biggest quarterly fall since the September quarter of 1997, and followed the previous quarter’s 1.2 per cent rise.
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The fall in consumer prices in the final three months of 2008 is further evidence of the impact of the global recession and falling commodity prices on the economy, Treasurer Wayne Swan says.

But Mr Swan said there was also evidence that the government’s $10.4 billion economic stimulus package had an impact, with a major retailer reporting a jump in sales.

The consumer price index (CPI) fell for the first time in two years during the December quarter because of lower prices for petrol, cars, health products and financial services.
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Domestic inflation figures due next week are likely to assume less importance than usual in the outlook for interest rates, the latest credit figures suggest.

Over the past few years the Reserve Bank of Australia (RBA) has fostered the impression that its decisions on monetary policy hinge on the quarterly consumer price index (CPI) data.
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