INFLATION DATA FORESHADOWS RBA RATE CUT

PRICES remained steady in the first three months of 2012 according to new data from the Australian Bureau of Statistics.

The Consumer Price Index (CPI) rose 0.1 per cent in the March quarter, compared with static growth in the previous period.

The cost of pharmaceutical products increased 14.1 per cent, secondary education jumped 7.7 per cent, tertiary education climbed 4.7 per cent and automotive fuel rose 2.5 per cent.

However, the price hikes were offset by depreciation of fruit (–30 per cent), audio-visual and computing equipment (–6.3 per cent), furniture (–6 per cent) and international holiday travel and accommodation (–4.8 per cent).

The Real Estate Institute of Queensland (REIQ) believes the steady CPI should convince the Reserve Bank of Australia to lower interest rates at its May 1 Board meeting.

“Today’s figures confirm that inflation is obviously well within the Reserve’s target band of 2 to 3 per cent,” says CEO Anton Kardash.

“All of these signs point to an economy that is certainly not firing on all cylinders, a fact the Reserve noted in its April meeting when it lowered its expectation for growth…the Reserve must now take back some control and reduce rates by at least 50 basis points on Tuesday.”

REIQ reveals the difference between the cash rate and average variable rate stands at 3.15 percentage points – the largest margin in nearly two decades.

“It’s unfortunate that the major lenders insist on achieving profit margins more in tune with the good times rather the current economy reality,” says Kardash.