Australian consumer expectations rise

SYDNEY - Inflation expectations among Australian consumers hit their highest since March 2003 in July, although that did not translate into predictions of higher wages, a private survey showed on Thursday.

The Melbourne Institute Consumer Inflationary Expectations survey rose to 4.7 per cent in July after small falls in May and June from 4.6 per cent in April.

Inflationary expectations can lead to higher inflation as workers demand higher wages in expectation of rising prices.

However, in July the survey found the mean expected annual hourly wage change for all occupations fell by 0.1 percentage point to 2.6 per cent, having averaged 2.9 per cent in the preceding six months.

The rise in inflation expectations coincided with a 5.5 per cent fall in consumer confidence against the backdrop of rising petrol prices, concerns over the government's new industrial relations legislation and after the London bombings.

Like Britain, Australia is also involved in the US-led war on terror in Afghanistan and Iraq.

The official reading of the consumer price index for the second quarter is due on July 27. A Reuters survey of economists found preliminary CPI forecasts centring on a 0.8 per cent increase over the second quarter and 2.7 per cent higher than a year earlier.

In the first quarter, the CPI rose 0.7 per cent and 2.4 per cent over the year to March.

The Reserve Bank of Australia has a 2-3 per cent inflation target.

- REUTERS