The latest inflation figures suggest the Reserve Bank of Australia can continue to leave the official interest rate unchanged for the rest of this year.
The cost of living should ease from here.
That’s the message the federal government wants to convey following the scrapping of the carbon tax and after the inflation rate struck its highest level since December 2011.
However, for all the coalition’s claims that prices would go “up and up and up” under Labor’s carbon tax, it took two years for the consumer price index (CPI) to reach the top of the Reserve Bank of Australia’s two to three per cent target band.
Of course, within the “shopping basket” of goods the Australian Bureau of Statistics monitors were some notable price increases since July 2012 – including a 23.3 per cent increase in electricity prices.
Acting Treasurer Bruce Billson was quick to remind consumers Treasury had estimated the abolition of the carbon tax would reduce the CPI by about 0.7 percentage points over the 2014/15 year.
Standing in for Joe Hockey, who is on an official trip to New Zealand, the small business minister also said the Australian Competition and Consumer Commission would ensure energy retailers passed on to customers the savings from last week’s repeal of the carbon tax.
Overall, the CPI rose 0.5 per cent in the June quarter, lifting the annual rate to three per cent from 2.9 per cent three months earlier.
Underlying inflation – the RBA’s preferred gauge which measures whether price pressures have become embedded in the economy – rose by 0.7 per cent on average to 2.8 per cent, which was slightly stronger than economists expected.
TD Securities head of Asia-Pacific research Annette Beacher says the only strong conclusion from the latest data is that it pulls the rug out from under forecasts of another cut in the official cash interest rate later this year.
“We expect the RBA to leave the cash rate at the record low of 2.5 per cent until March 2015, with risks of a delay, not a rate cut,” she said.
The good news of continued stable interest rates coincided with other government figures suggesting improving job prospects, particularly for those seeking employment in community and personal services.
These occupations were the strongest in demand through internet job advertisements in June.
In trend terms, vacancies have risen for 10 consecutive months since the record low in August 2013, the Department of Employment said.
They now stand at their highest level since December 2012.