By Jacob Greber
July 23 (Bloomberg) -- Australian inflation accelerated in the second quarter to the fastest pace in two years, adding to pressure on the central bank to leave borrowing costs at a 12- year high.
The consumer price index rose 1.5 percent from the first quarter, when it gained 1.3 percent, the Bureau of Statistics said in Sydney today. The median estimate in a Bloomberg News survey of 22 economists was for 1.3 percent. Prices gained 4.5 percent from a year earlier, the most since 2001.
The surge in prices gives central bank Governor Glenn Stevens little scope to cut borrowing costs even as the nation's 17-year economic expansion slows. Stevens, who raised the benchmark interest rate to 7.25 percent in March, said last week that chances of getting inflation back within his target range of 2 percent to 3 percent are ``good.''
``The Reserve Bank will be prepared to look through the hump in inflation'' and keep borrowing costs unchanged in coming months, provided the economy slows, said Su-Lin Ong, a senior economist at RBC Capital Markets in Sydney. ``We know that inflation is heading higher. This report shouldn't change the Reserve Bank's forward view.''
The Australian dollar was little changed at 97.06 U.S. cents at 12:37 p.m. in Sydney from 97.11 cents immediately before the report. The yield on the two-year government bond rose 1 basis point, or 0.01 percentage point, to 6.63 percent.
Global Dilemma
By contrast, the New Zealand dollar declined for a sixth day, its longest stretch since May 15, as traders increased bets the Reserve Bank of New Zealand will lower interest rates as soon as tomorrow.
Stevens faces the same challenge as policy makers around the world in balancing higher inflation with slowing economic growth. Consumer prices in the U.S. surged 5 percent in the year through June, the biggest jump since 1991, and in Europe they climbed 4 percent, the fastest pace in more than 16 years.
Financial and insurance costs rose 3.8 percent in the second quarter and transport gained 3.1 percent, while clothing and shoes jumped 3 percent, today's report showed. By contrast, recreational costs fell 0.2 percent and food slid 0.1 percent.
While the consumer price index ``might rise further before it starts to come down,'' central bank policy makers ``still expect inflation to fall back to 3 percent by mid-2010, and to continue declining gradually thereafter,'' Stevens said July 16.
Gasoline, Hospitals
The Reserve Bank of Australia left borrowing costs unchanged on July 1 for a fourth month to assess fallout from the global credit squeeze and rising gasoline costs that have eroded household incomes. The cost of crude oil has soared 71 percent in the past 12 months
Policy makers review rates again on Aug. 5 and will publish revised forecasts for inflation and economic growth on Aug. 11.
Gasoline rose 8.7 percent in the quarter, while costs for deposits and loans jumped 9.5 percent, today's report shows. Hospital and medical prices advanced 4 percent.
There is ``pretty clear evidence'' that rising gasoline prices and higher borrowing costs are forcing consumers and businesses to cut spending, Stevens said last week.
Stevens said on July 16 he expects higher fuel and borrowing costs will cool the $1 trillion economy, which expanded at the slowest pace in almost two years in the first quarter. Gross domestic product will expand 2.25 percent this year, down from 3.9 percent in 2007, the Reserve Bank said in May.
Consumer Confidence
Consumer confidence slumped in July to the lowest level in 16 years, businesses were the most pessimistic in June since 2001 and home-loan approvals fell in May by the most in eight years.
Today's report includes the Reserve Bank's core inflation measures, which exclude the largest price gains and declines. The weighted-median gauge of inflation rose 1 percent in the quarter for an annual increase of 4.5 percent, the biggest gain since the June quarter of 1991.
``There is nothing in these numbers to draw the conclusion that the inflation problem is behind us,'' said Katie Dean, a senior economist at Australia & New Zealand Banking Group Ltd. in Melbourne. ``As such, any talk of a near-term easing of policy remains premature.''
Inflation may accelerate further in coming months as mining companies such as Rio Tinto Group and BHP Billiton Ltd. drive up wages to compete for skilled workers amid rising demand from China for iron ore and other commodities.
Unemployment fell to 3.9 percent in February, the lowest level in more than three decades. The rate was 4.2 percent last month.
Investors have increased bets this month that the central bank will cut interest rates, according to a Credit Suisse Group index based on trading in interest-rate swaps. Traders expect Stevens will lower the benchmark rate by 11 basis points, or 0.11 percentage point, in the next 12 months. At the start of this month, they forecast 19 basis points of gains.
To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net
Posts
No comments:
Post a Comment