Inflation rises more than expected but stays below Reserve Bank target
Official figures show consumer prices rose a little more than most economists were expecting, but inflation remains within the Reserve Bank's target range.
- Headline quarterly inflation 0.4 per cent, annual 1.7 per cent
- RBA's preferred 'core' annual inflation measure was 2 per cent
- Biggest annual price rises were tobacco and alcohol, education and health
- Annual price falls for communication and transport
The Bureau of Statistics December quarter figures showed consumer prices rose 0.4 per cent in the quarter and 1.7 per cent over 2015.
The Reserve Bank aims to keep inflation within a 2-3 per cent range when it is setting interest rates, and its preferred 'core' measures of consumer prices rose an average of 2 per cent over the past year.
Economists had typically forecast quarterly inflation of 0.3 per cent and annual inflation of 1.6 per cent, with core inflation expected to be 2.1 per cent.
BT Financial Group's chief economist Chris Caton said the data all but rule out a February interest rate cut when the Reserve Bank meets for the first time in 2016 next Tuesday.
"The headline CPI came in a touch above expectations, with the underlying measures much as expected," he observed.
"This will probably convince the few lingering doubters that there is no rate cut coming in February."
CommSec's Savanth Sebastian said "the door remains ajar" for another interest rate cut, but it will not be due to inflation data.
"The Reserve Bank can comfortably ignore inflation and discuss merits of another interest rate cut on the economy if needed," he wrote in a note on the data.
The biggest price rises over the quarter were for tobacco (7.4 per cent), domestic holiday travel and accommodation (5.9 per cent) and international travel (2.4 per cent).
However, falling fuel prices (5.7 per cent), telecommunications (2.4 per cent) and fruit (2.6 per cent) offset a large part of those increases.
The ABS also noted that the 0.1 per cent increase in housing costs was the weakest movement since March 1998.
However, the bureau's measure does not capture price movements in home purchase, instead looking at rents and the cost of home building.
Over the past year, alcohol and tobacco (6 per cent), education (5.5 per cent) and health (5.3 per cent) saw the biggest price increases.
However, prices fell for communication (6.3 per cent) and transport (1.4 per cent), with falling fuel prices behind much of the lower transport costs.
Source: ABC News