The TD Securities – Melbourne Institute Monthly Inflation Gauge rose by 0.1% in September, following two months of flat results.
Contributing to September’s change were price rises for fruit and veg (+1.6%), tobacco (+2%), and holiday travel and accommodation (+3%), offset by falls in health (-1%), fuel (-4.4%), and clothing and footwear (-0.6%).
The trimmed mean of the Inflation Gauge also rose by 0.1 per cent in September, to be 2.3 per cent higher than a year earlier.
In the 12 months to September, the Inflation Gauge increased by 2.2 per cent, following a 2.4 per cent increase for the 12 months to August. July’s rate was revised down 0.2% per to flat following the removal of the carbon tax.
Annette Beacher, Head of Asia-Pacific Research at TD Securities said the forecasts “look rather benign”.
“We expect headline inflation to increase by 0.4% in the quarter, to be 2.2 per cent higher than a year ago, while we forecast underlying inflation to increase by 0.5% in the quarter, for an annual rate of 2.6%,” she said.
“We expect underlying inflation to remain at the mid-point of the RBA’s 2-3 per cent target band over the next year while the impact of the carbon tax removal temporarily dampens prices, however, the recent slump in the exchange rate brings fresh upside to the outlook for 2015.”
Beacher said that despite the 6% drop in the Aussie dollar during September, she expects the RBA to leave the cash rate at 2.5% when it meets tomorrow, but the interesting part will be whether the Board still considers the exchange rate at an historically high level.