Australia's 2012 inflation rate of 2.3% was at lower end of Royal Bank of Australia's target, leaving room for interest-rate cut later this month, says country's Housing Industry Assn.

CAMPBELL, Australia , January 23, 2013 (press release) – The consumer price index for the December 2012 quarter shows underlying inflation has remained at the lower end of the RBA’s inflation-target range, thereby leaving room for an interest rate cut next week, says the Housing Industry Association (HIA), the voice of Australia’s residential building industry.

Headline CPI increased by 0.5 per cent in the December 2012 quarter which provided a 2.2 per cent increase for the 2012 calendar year. Underlying inflation (the RBA’s preferred measure of inflation) was slightly higher, increasing by 0.6 per cent in the December 2012 quarter and 2.3 per cent over the 2012 calendar year. This result was towards the lower end of the range anticipated by analysts. “Relatively low inflation late in 2012 suggests the rate cuts in mid-2012 have not triggered any material uplift in inflation in the second half of 2012. This is testament to the change in household attitudes and consistent with more conservative approach to spending. It seems saving is increasingly preferable to consumption,” said HIA Economist, Mr Geordan Murray.

“Underlying inflation was only 2.3 per cent over the 2012 calendar which implies price pressures in the Australian economy have been very well contained. This leaves the RBA with ample room to cut rates when the board meets in February,” said Geordan Murray

“There has been growing concern at the inability of the non-resource sectors to make material contributions to economic growth under the monetary and fiscal policy settings of late 2012,” said Geordan Murray. “Throughout 2012 we saw the RBA cut interest rates a number of times to stimulate economic activity. Now, with a budget surplus in 2012/13 no longer on the federal government’s policy agenda, it paves the way for fiscal policy to be realigned to support rather than detract from economic growth” added Geordan Murray

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