The latest inflation data from the Australian Bureau of Statistics contained concerning news, with the consumer price index rising from an annualised rate of 3.6% in April to 4.0% in May, moving inflation further away from the Reserve Bank’s target range of 2-3%.
The categories that recorded the largest price rises in the year to May were insurance & financial services (7.8%), alcohol & tobacco (6.7%), health (6.1%), housing (5.2%), education (5.2%) and transport (4.9%).
However, prices rose only 3.3% for food & non-alcoholic beverages, 2.8% for clothing & footwear, 2.0% for recreation & culture and 0.7% for communications. And prices actually fell 1.1% in the furnishings, household equipment & services category.
The minutes from the Reserve Bank’s most recent monetary policy meeting, on June 18, reveal that board members felt inflation remained a little higher than previously expected.
“Members judged that longer-term inflation expectations in Australia were still anchored but should continue to be monitored closely,” the minutes stated.
“Members acknowledged that if inflation expectations were to rise materially from current levels, it could require significantly higher interest rates to bring inflation back to target, with adverse implications for growth in output and employment.”
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