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Rising inflation no longer below par

Rising inflation no longer below par

Inflation is now back within the Reserve Bank’s 2 to 3 per cent target band, with a noticeable uptick being recorded over the last 12 months.

Latest figures from the Australian Bureau of Statistics (ABS) put inflation at 2.1 per cent over the year, having increased by 0.4 per cent for both the March and June 2018 quarters.

ABS chief economist Bruce Hockman said it was only “the second annual rise above 2.0 per cent since September quarter 2014”.

However, he suggested the rise was primarily due to price growth among the more volatile sectors of the economy, and not an indication that inflation is mounting an immediate comeback.

“Most of this annual growth is due to strength in fuel, electricity and tobacco. Annual growth in prices of discretionary goods, such as clothing and footwear, and furniture and household equipment, remain subdued,” he said.

The RBA is likely to welcome the return to a more normal inflationary environment. However, it is unlikely to use this as justification to raise rates any time soon, given that the volatile sectors are driving the uptick, prices could just as easily fall again in the short-term and reverse these gains.

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Its board is due to meet for its monthly review of official interest rates on Tuesday, 7 August.

That will be welcome news to the nation’s mortgage holders, already dealing with the combination of falling property prices and rising borrowing costs.

Automotive fuel was the biggest mover in the quarter, with prices surging by 6.9 per cent.

Medical and hospital services were also up, rising by 3.1 per cent, while tobacco rose by 2.8 per cent.

The larger categories of transport and clothing and footwear were up a more modest 1.6 per cent and 1.3 per cent respectively, with health rising by 1.9 per cent.

The cost of insurance and financial services edged up by just 0.4 per cent in the quarter.

On a national basis, price growth was strongest in the country’s south-east, with Canberra leading the charge at 2.8 per cent. This was closely followed by Adelaide (2.7 per cent), Melbourne (2.5 per cent) and Hobart (2.4 per cent), while Sydney saw overall prices rise by 2.1 per cent.

Perth (up 1.1 per cent), Darwin (1.2 per cent) and Brisbane (1.7 per cent) saw the weakest price growth respectively.

Rising inflation no longer below par
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