Inflation in Australian accelerated again in April according to the TD Securities – Melbourne institute monthly inflation gauge which rose 0.4% to take the year on year increase to 2.8% in the 12 months to April.
The key drivers of the outcome last month were, “price rises for communication (+2.6 per cent), tobacco (+2.4 percent), and holiday travel and accommodation (+6.4 per cent). These were offset by falls in fruit and vegetables (-6.7 per cent), clothing and footwear (-2.1 per cent), and automotive fuel (-2.1 per cent).”
The inflation outcome is just part of the overall story in the economy that has TD Securities head of Asia-Pacific Econonomics Annette Beacher calling for rate rises this year.
She said in a statement accompanying the release that,
We don’t share the market view that the RBA is set to leave the cash rate at its record low 2.5 per cent for another year. The recent ‘soft’ March qtr CPI report masked the nasty surprise that annual tradable inflation jumped to a mid-target pace after two years of deflation. This unwanted inflation, combined with a robust housing sector and signs that prior savings are re-fuelling consumption, suggests that the case for holding the cash rate at record low levels is no longer there.
Beacher’s base case is 50 basis points, half a percent by year’s end.
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