Inflation breaks through RBA upper target

Printing and associated industries are unlikely to face another interest rate rise next month despite a higher inflation outcome reported in the March 2008 quarter.

According to data released by the Australian Bureau of Statistics (ABS), inflation was reported to have increased by 1.3 per cent during the March 2008 quarter resulting in an annual inflation rate of 4.2 per cent.

The headline rate has now passed the upper limit of the Reserve Bank of Australia's (RBA) target and the RBA's preferred measure of inflation, the underlying rate of inflation was also reported to have increased during the March 2008 quarter.

The underlying rate rose between 1.2 per cent and 1.3 per cent implying that the RBA's preferred measure of inflation is now running at a rate of between 4.1 per cent and 4.4 per cent.

The most significant offsetting price reductions came from audio, visual and computing equipment, furniture, domestic holiday travel and accommodation and accessories.

Inflation in the non-tradable sector rose by 1.7 per cent during the quarter and by 5.0 per cent during the year to March. The tradables sector reported a rise of 0.8 per cent during the quarter resulting in an annual increase of 3.3 per cent for the year to March.

Brisbane once again reported the highest annual inflation rate at 4.8 per cent followed by Canberra at 4.6 per cent; Adelaide 4.5 per cent; Melbourne 4.4 per cent; Perth 4.3 per cent; Sydney and Darwin each at 3.9 per cent; Hobart at 3.8 per cent.

On Monday another major measure of inflationary pressures – producer prices was released showing a rapid rise in prices during the quarter for goods at all stages of production. Final stage goods which were reported to have increased by 1.9 per cent during the March quarter, resulted in the annual change rising from 2.8 per cent last quarter to 4.8 per cent this quarter. For the year to March preliminary stage prices were reported to have risen by 6.9 per cent while intermediate stage prices rose by 6.0 per cent.

At a more disaggregated level, output prices for printing and services to the printing sector rose by 0.8 per cent during the quarter but fell by 1.5 per cent during the year to March.

In the publishing sector output prices rose by 0.6 per cent during the quarter and increased by 1.4 per cent during the 12 months to March.

Printing Industries national policy and research manager, Hagop Tchamkertenian said the March quarter results should not force the RBA to act by lifting official interest rates.

"In the recent period we have seen signs that the current rate rises are starting to have an impact on economic activity," he said

"The recent retail trade data clearly shows a weakening trend".

Hagop said the RBA is likely to be unmoved by the March inflation figure as it had already factored in such a result.

"I do not believe that today's inflation data has increased the prospects of another rate hike by the Reserve Bank in May," he said.

"The Reserve Bank in its last statement on monetary policy indicated that its monetary policy decisions combined with increases in borrowing costs occurring independently of changes in the cash rate is helping to moderate demand which will help take pressure off inflation."