Inflation threat continues

Inflation continued to grow at a worryingly rapid pace in August despite international credit wobbles, according to the TD Securities-Melbourne Institute Monthly Inflation Gauge released today.

According to the gauge, inflation rose 0.5% in August, a big increase that follows a 0.6% rise in July.

This leaves inflation for the year to August at 2.9%, right at the top of the Reserve Bank of Australia’s target band of 2% to 3%.

However, the trimmed mean inflation gauge, a statistical measure of underlying inflation closer to that used by the RBA, has increased 3.1%, a breach of the RBA’s target policy that could make it more likely we will see a further rate rise before the end of 2007.

The ongoing strength of the Australian economy is also reflected in a range of other economic figures released today:

  • Job ads increased by 0.1% in August from already high levels, according to the ANZ Job Ads series.
  • Company profits increased 1.4% in the June quarter, while inventories lifted by 0.4% and wages a very strong 2.2%, all pointing to strong economic conditions.
  • The Australian Industry Group-PricewaterhouseCoopers Australian Performance of Manufacturing Index fell five points from recent high levels, but even so indicated that the manufacturing sector has maintained its 15th consecutive month of growth.

Mike Preston



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