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    Inflation rises in June quarter, interest rates to remain low and steady

    Housing Industry Association

    The Housing Industry Association (HIA), representing Australia’s residential building industry reveals a slight increase in the annual rate of inflation during the June 2014 quarter; however, the RBA will be retaining the interest rates at their current lows for some time.

    According to the latest data, the headline rate of annual inflation increased to 3.0 per cent in the June 2014 quarter, up from the 2.9 per cent rate recorded during the preceding quarter. The key measures of underlying inflation stood at 2.9 per cent and 2.7 per cent respectively during the quarter. Both measures are still within the RBA’s inflation target range, although the trimmed mean measure has risen since the previous quarter.

    HIA Senior Economist, Shane Garrett explains that the data indicates the slowly increasing inflationary pressures in the economy; however, this is in line with expectations and the RBA will not be diverted from its low interest rate strategy on this account.

    He added that the strong Australian dollar is impacting growth in the economy’s traded sectors; therefore, interest rates need to stay low to keep the dollar in check. The low interest rates are also helping to stimulate demand in several important sectors of the domestic economy, including residential construction.

    According to Shane Garrett, both of these factors will make the RBA reluctant to increase interest rates for some time to come.

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