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The TD Securities/Melbourne Institute Monthly Inflation Gauge rose 0.2% in June following a 0.1% rise in May. Over the twelve months to June, the TD/MI Inflation Gauge has now risen 2.6% - still in the top half of the Reserve Bank of Australia’s target range of 2-3%. Contributing most to the overall increase in the Inflation Gauge for June are rises in fruit, dwelling rent, and holiday travel and accommodation. Price decreases in vegetables, automotive fuel and alcoholic drinks partially offset the rises. The price of petrol fell 1.8% during June. The reading on core inflation is mixed. The trimmed mean of the TD/MI Inflation Gauge suggests core inflation is contained at 2.3% in the year to June. The core measure obtained by excluding volatile items (automotive fuel, fruit and vegetables), rose 0.4% in June and was 3.3% up on an annual comparison. According to Joshua Williamson, Senior Strategist at TD Securities, the survey suggests that virtually none of the current inflation is imported, meaning the strengthening AUD appears to be a factor keeping prices of tradeable goods from increasing. But Williamson also point out that domestic inflation is running at a 4.1% in the year to June. He believes the worry factor in the June inflation report stems from the conclusion “that domestic inflation pressures will remain elevated and even increase further. The risk is that the magnitude will be greater and the timing earlier than the RBA expects.” |
