Soft Australian inflation sets scene for rate cut

Australia said Tuesday inflation rose a weaker-than-expected 0.1 percent in the March quarter, fuelling speculation the central bank will cut interest rates next week.

The Consumer Price Index had been expected to rise 0.6 percent for the quarter and analysts said the weaker figure essentially locked in a stimulatory rate cut when the Reserve Bank of Australia (RBA) meets on May 1.

The Australian Bureau of Statistics figures showed the CPI climbed 1.6 percent through the year to the March quarter, well down on the 3.1 percent rise recorded through the year to December.

Treasurer Wayne Swan said the ongoing recovery from last year's natural disasters -- epic floods and Cyclone Yasi which hit coal mines and destroyed crops -- meant the price of fruit had dropped by 30 percent over the quarter.

"These are very much welcome figures," Swan told reporters. "But we do know that many households are doing it tough."

Swan, who will hand down the national budget on May 8, denied that the data was an indication growth was weakening in the economy dubbed the "Wonder from Down Under" after it escaped recession during the global crisis.

"Contained inflation is a reminder of our strong economic fundamentals that have put the Australian economy in a league of its own," Swan told reporters in Canberra.

"What we have here is solid growth, low unemployment, strong public finances, a huge investment pipeline plus contained inflation and that does create room, and has created room, for interest rates cuts last year."

Analysts said the data, which saw the Australian dollar drop almost half a cent on the news, left the RBA open to cut rates at its next meeting.

The bank, which last eased rates in late 2011, kept them on hold at 4.25 percent this month but indicated it would be prepared to announce a cut if inflation weakened.

"Really there is no sign at all of the inflation bogeyman," Westpac senior currency strategist Sean Callow told Dow Jones Newswires.

Economist Shane Oliver from AMP Capital said the underlying inflation rate of 2.2 percent -- at the lower end of the central bank's 2.0 to 3.0 percent comfort zone -- had cleared the way for an interest rate cut.

Given global uncertainty, the softness in the economy, borrower caution and a benign inflation outlook, interest rates should fall by 75-100 basis points over the next six months, he said.

While there was no doubting the strength of the mining investment boom, it was not delivering anything like the trickle down boost to the economy seen in earlier booms, added Oliver.

"At the same time the non-mining economy is suffering under the impact of the strong Australian dollar and relatively high bank lending rates," he said.

"The result is parts of the economy are in recession and overall GDP growth is sub-par."

The data comes as a new report warned the gap between Australia's turbo-powered mining sector and the rest of the economy was widening.

"Australia has a two-speed economy," Deloitte Access Economics said, noting that families were saving rather than spending, retail and housing construction were underperforming and government spending was weakening despite the mining boom.

"The two-speed split in Australia's economy, which was already large, is getting larger still," it said.

Loading...

Editor’s note:Yahoo Philippines encourages responsible comments that add dimension to the discussion. No bashing or hate speech, please. You can express your opinion without slamming others or making derogatory remarks.

  • Phl, Japan sign P9.6-B ODA projects
    Phl, Japan sign P9.6-B ODA projects

    The Philippines and Japan have signed agreements for six official development assistance (ODA) projects amounting to 22.289 billion yen or around P9.6 billion. …

  • Commission to launch glossary of Pinoy meteorological terms
    Commission to launch glossary of Pinoy meteorological terms

    The Komisyon sa Wikang Filipino (KWF) will release a glossary of meteorological terms in Filipino to help the Filipino people better understand weather forecasts and instill disaster awareness among them. National Artist for Literature and KWF president Virgilio Almario said yesterday the KWF produced the glossary titled Patnubay sa Weder Forkast to simplify scientific terms used in the weather bulletins of the Philippine Atmospheric Geophysical and Astronomical Services Administration …

  • Divorce bill good scapegoat for couples – CBCP
    Divorce bill good scapegoat for couples – CBCP

    Contrary to what romance novel writers would want their readers to believe, there are no perfect marriages in the real world. This was according to Catholic Bishops’ Conference of the Philippines (CBCP) president Lingayen-Dagupan Archbishop Socrates Villegas. In a statement titled “CBCP Position Against the Divorce Bill and Against the Decriminalization of Adultery and Concubinage,” Villegas said that while it is not easy to make relationships last, learning how to work out differences – and …

  • DND holds off infra dev’t in Pag-Asa
    DND holds off infra dev’t in Pag-Asa

    The defense department is holding off repairs and other planned infrastructure projects on Pag-Asa Island, one of seven islets and two reefs occupied by Filipino troops in the disputed Spratly Islands. Earlier, Foreign Affairs Secretary Albert del Rosario pointed out that the maintenance and repair of facilities in Pag-Asa Island are not covered by the Declaration of Conduct (DOC) of parties involved in the West Philippine Sea territorial disputes. “Repair and maintenance is okay but before …

  • Blackout to hit 5 Aurora towns
    Blackout to hit 5 Aurora towns

    An 11-hour power outage will hit five towns in Aurora on Tuesday, the National Grid Corp. of the Philippines (NGCP) announced yesterday. The NGCP said Baler, Dingalan, San Luis, Ma. Aurora and Dipaculao would be affected by the blackout. The NGCP said parts of Nueva Ecija and Aurora were hit by a power interruption yesterday due to the tripping of the Cabanatuan-Baler 69kV line. …

  • Rules set for climate change programs
    Rules set for climate change programs

    The Department of Budget and Management (DBM) and the Climate Change Commission (CCC) have released the revised guidelines to track and monitor climate change adaptation programs of the government. “The government of the Philippines has demonstrated leadership and strong commitment in implementing a comprehensive reform agenda to respond to climate change,” read the joint memorandum circular published in The STAR yesterday. “With the goal of using the budget process to plan, prioritize and …

  • It’s time to move on– Speaker
    It’s time to move on– Speaker

    The nation can now move on as President Aquino has satisfactorily explained his side on the Mamasapano incident for which he even begged for understanding, lawmakers led by Speaker Feliciano Belmonte Jr. said yesterday. “It’s time to move on,” Belmonte said in reaction to Aquino’s pronouncements made before new police graduates at the Philippine National Police Academy (PNPA) last Thursday. The President has spoken far too much about what he knows and about his limited involvement in the …

  • ToyotaPH continues it’s strong sales in February
    ToyotaPH continues it’s strong sales in February

    Toyota Motor Philippines (TMP) sustains its strong sales in its February performance. Toyota’s strong performance last month was due to the  high demand of the Vios, with sales of 2,012 units and of course the rest of Toyota’s line up such as the Fortuner, Innova, Wigo, Hilux, Avanza and Corolla Altis. Toyota’s luxury brand, Lexus, recorded 60 units last month. …

POLL

Should Aquino be held accountable over the Mamasapano operations?

Loading...
Poll Choice Options