Rates likely steady on inflation data

The Reserve Bank appears to have a little breathing space for an interest rate rise with good inflation figures showing price pressures largely under control.

The Australian Bureau of Statistics reported today that prices nationally rose by 0.6 per cent through the first three months of the year. Over the past 12 months they have climbed by 2.9 per cent.

The rate is within the Reserve Bank’s 2 to 3 per cent target range. Underlying measures of inflation, which attempt to strip out one-off price impacts, were better at 2.65 per cent.

There were some large seasonal impacts on the quarterly result.

Tobacco prices lifted by 6.7 per cent, petrol jumped by 4.1 per cent, secondary education increased by 6 per cent and tertiary education costs jumped by 1.9 per cent.

There was also a 6.1 per cent increase in pharmaceutical products.

There was a fall in the prices of furniture, down by 4.3 per cent, the repair of motor vehicles (3.3 per cent) and international holiday travel and accommodation (2.4 per cent).

Analysts had been predicting a quarterly inflation rate of anywhere between 0.4 per cent and a full percentage point.

The annual rate was narrower, between 2.8 per cent and 3.4 per cent with the median at 3.2 per cent.

Prices in Perth rose a little quicker than the national average, up by 0.7 per cent in the quarter to be 3.1 per cent higher over the past year.

Canberra enjoyed the lowest price increases, up by 0.5 per cent in the quarter and 2.6 per cent over the past 12 months.

Despite coming in at 2.9 per cent, the annual rate of inflation has grown sharply over the past few months.

In the September quarter annual inflation was running at 2.2 per cent.

The Australian dollar was a touch firmer at 93.75 US cents at 9.45am.