Australia Inflation Misses Target

Consumer prices in Australia expanded 0.2% quarterly compared with estimates of 0.4% and 1.9% annually compared with the 2.2% estimate. Reserve Bank of Australia targets inflation to be in the range of 2-3%.

Moreover, RBA’s preferred inflation measure—core inflation—grew 0.5% in the quarter and 1.8% in the last one year. However, this was still far from RBA’s target range. Weaker inflation figures led to a decline in the Australian dollar, Seeking Alpha reported.

The lower-than-expected inflation is primarily being attributed to falling oil prices. This strengthens the possibility of interest rates remaining unchanged in the near future.

Labor market in Australia is resilient, as reflected by the jobs report of June 2017. Full-time jobs surged 62,000 in June compared with 53,400 in May, the biggest two-month increase since 1988. Part-time jobs on the other hand fell 48,000 in June for a net increase of 14,000 jobs.

Although the employment data is expected to bode well for people expecting a rate hike by the RBA, Australia’s housing market is booming. Some economists predict that it has peaked, and if the RBA goes on an aggressive rate hiking spree, the housing market could crash. Therefore, the path RBA will adopt in regard to interest rates is still quite uncertain.

Meanwhile, the Australian share market is expected to start the week higher, bouncing back from Friday’s 1.4% plunge on the back of concerns about the US economy and the direction of US government policy. The local share prices futures index ended the week up 24 points or 0.4%.