KEY POINTS:
Australian inflation accelerated further above the central bank's comfort zone last month as petrol prices climbed, a private survey showed yesterday, suggesting interest rates may have to rise again.
The TD Securities-Melbourne Institute monthly inflation gauge rose 0.3 per cent, following a matching increase in October.
Annual inflation picked up to 3.4 per cent, from 3.3 per cent, the fastest pace since March and above the top of the Reserve Bank of Australia's (RBA) 2 to 3 per cent target band.
"Inflation remains a persistent force," said Joshua Williamson, a senior economist at TD.
He noted the trimmed mean of the gauge, a statistical measure of underlying inflation, rose 0.4 per cent last month, lifting the annual rate to 3.6 per cent, from 3.2 per cent in October.
The central bank has already raised its forecasts for underlying inflation, seeing it reach 3.25 per cent by mid-2008 from 3 per cent now. Seeking to cool the economy, the bank raised rates in August and November, to an 11-year peak of 6.75 per cent.
The RBA's policy board holds its December meeting today but no one expects a further tightening so soon after the last move and while the squeeze in global credit markets still clouds the outlook for world growth.
Still, most analysts suspect rates will have to be lifted again given the strength of domestic demand.
Gross domestic product figures out tomorrow are expected to show the economy grew 4.8 per cent in the year to the third quarter, well above the pace analysts consider sustainable.
"On inflation grounds alone, the case for a further interest rate rise is compelling, but the market ructions suggest a cautious approach from the RBA," said TD's Williamson.
Contributing most to the overall increase last month was a sharp rise in the price of petrol, and rises in the prices of deposit and loan facilities, fruit and rental accommodation.
Petrol rose 17.5 per cent in the year to November and the cost of rental accommodation rose 7.5 per cent.
These rises were partially offset last month by falls in the prices of vegetables, holiday travel and accommodation, and audio, visual and computing equipment. Inflation excluding volatile fuel, fruit and vegetable prices, rose by 0.1 per cent last month, while the annual pace slowed to 3.2 per cent from 3.4 per cent.
- Reuters
