Interest rates rise fear ease

Australian Bureau of Statistics (ABS) inflation data shows that during the March quarter inflation increased by a modest 0.1 per cent resulting in an annual rate of inflation of just 2.4 per cent.

Factors leading to price pressures during the quarter included pharmaceuticals which rose by 12.8 per cent; house purchase (1.0 per cent); secondary education fees (7.1 per cent); and rents (1.4 per cent).

The most offsetting price decreases came from fruit (33.8 per cent); furniture (3.3 per cent); overseas holiday and accommodation (2.2 per cent); and audio, visual and computing equipment (2.4 per cent).

The tradable sector reported a price reduction of 1.0 per cent resulting in an annual price increase of just 1.0 per cent. The non-tradable sector reported a quarterly price rise of 0.9 per cent resulting in an annual price movement of 3.5 per cent.

Northern Territory reported the highest annual rate of inflation at 4.0 per cent followed by Western Australia at 3.5 per cent; Queensland at 2.9 per cent; Australian Capital Territory at 2.4 per cent; New South Wales and Victoria each at 2.2 per cent; Tasmania at 2.1 per cent and South Australia at 1.8 per cent.

The March quarter inflation data comes a day after the release of the March quarter producer prices which also showed a moderating trend.

Businesses at each stage of production continued to absorb costs during the March 2007 quarter as both preliminary and intermediate producer prices rose while final prices remained stable. In the year to March 2007 final producer prices were reported to have risen by 2.8 per cent compared to intermediate prices which rose by 4.6 per cent and preliminary prices which rose by 4.5 per cent.

In the printing, publishing and recorded media industry, raw material prices rose by 0.1 per cent during the March quarter and were up by 1.9 per cent during the year to March. Industry output prices were reported to have increased by 1.1 per cent during the quarter and by 1.9 per cent during the year to March.

Commenting on the March 2007 quarter data, Printing Industries national policy and research manager, Hagop Tchamkertenian, said the modest inflation data came as a surprise for many commentators.

"A month ago the prospect of an interest rate hike was firming due to strong consumer spending and strong growth in the housing sector. But the latest inflation data should now ease those concerns," he said.

"With headline inflation running at 2.4 per cent on an annual basis and core inflation falling from 2.7 per cent to 2.5 per cent during the March quarter, and given the recent downward trend in producer prices, the Reserve Bank is now unlikely to raise interest rates.

"Because pressure on interest rates is now easing, the printing industry should benefit from the prospect that interest rates are likely to be on hold for at least six months.

"Given the sensitivity of the printing industry to interest rate movements the latest set of inflation data is welcome news," he said.

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