Inflation data should encourage RBA to cut rates again in February

The December quarter Consumer Price Index figures show that the Reserve Bank of Australia’s consumer price measures of inflation are within their target zone.

The analytical series of trimmed mean and weighted median increased by 0.6% and 0.5% respectively for the December quarter 2011, compared with 0.4% for both measures in the previous quarter.

The annual change in trimmed mean and weighted median is 2.6% for both measures for the December quarter, compared with 2.4% and 2.7% respectively for the September 2011 quarter

The latest figures are well within the RBA’s target zone of 2% to 3% and should provide a clear message to the RBA to reduce official interest rates at its February meeting.

The housing group showed a slowing down in the quarterly rate – from 1.9% in the September quarter 2011 to 0.4% in December quarter 2011 – the annual rate decreased from 4.2% for the 12 months to September 2011 and to 4% for the 12 months to December 2011.

The main contributor to the December quarter increase for the housing group was rents, which increased 1%.

For the year to December 2011 the biggest increases in the housing group were for electricity (12.2%), water and sewerage (8.6%) and gas and other household fuels (6.7%), with inflation within the RBA’s target zone. Given the latest outlook for the Australian and global economies it is appropriate to have a third consecutive cut in interest rates.

Pamela Bennett is president of the Real Estate Institute of Australia.