Inflation in Australia Remains Steady, Defying Petrol and Banana Price Drops

Consumer prices in Australia were unchanged in September, despite significant decreases in petrol and banana prices, according to the TD Securities-Melbourne Institute's monthly inflation gauge. The report revealed that prices rose in 33 expenditure groups, while 15 groups experienced a decline and 42 remained unchanged. The sustained inflation is attributed to rising costs of financial services, house purchases, and holiday travel and accommodation, suggesting that monetary policy may be too loose.

Key Takeaways:

• Inflation remained steady in September, with the TD-MI inflation gauge showing no change from August.
• The prices of consumer goods and services rose by 3.1% over the 12 months to September, down from 3.8% the previous month.
• The Reserve Bank of Australia's (RBA) target range of 2-3% inflation is still above the current 12-month average.
• University of Melbourne economist Don Harding attributes sustained inflation to monetary policy, claiming that "both [petrol and banana prices] are distractions".
• TD Securities chief strategist Stephen Koukoulas believes the RBA will maintain its tightening bias, despite easing inflation numbers.
• The drop in automotive fuel subtracted 0.5 percentage points from the change in the TD-MI gauge.
• Excluding volatile items like bananas and petrol, inflation rose 0.7% from August and 2.9% from a year ago.

Statistics:

• Inflation rate: 3.1% over 12 months to September.
• Price changes by expenditure group: 33 groups rose, 15 fell, and 42 remained unchanged.
• Contribution to overall inflation increase: Financial services (9.2%), house purchases (8.1%), holiday travel and accommodation (5.6%).
• Forecast for Australian Bureau of Statistics' consumer price index (CPI) for September quarter: 0.95%.

Sources:

• TD Securities-Melbourne Institute's monthly inflation gauge.
• Australian Associated Press (AAP), 29 September 1056.