Prices of goods and services were fairly flat in August, making the chance of an interest rate hike less likely.
The flat result for the latest TD Securities/Melbourne Institute monthly inflation gauge followed a 0.2 per cent rise in July.
Price rises for fruit and vegetables, furniture and the newspaper, books and stationary category were offset by falls in health costs, petrol and holiday accommodation.
The gauge was up by 2.5 per cent for the 12 months to August, which is much lower than the official inflation rate of three per cent in the year to June, right at the top of the Reserve Bank’s target band.
It is becoming clearer that the surprise spike in inflation in the June quarter won’t make an interest rate hike more likely.
Price rises in the past two months have been subdued or non-existent, which should allow the Reserve Bank to stick to its policy of keeping the cash rate stable for the foreseeable future.
TD Securities head of Asia-Pacific research Annette Beacher is not expecting any surprises from the RBA board meeting about interest rates on Tuesday.
“The RBA continues to express uncertainty about Australia’s economic health once the mining boom ends, hence for tomorrow’s board meeting we expect more of the same stability in interest rates,” she said.
All 15 economists surveyed by AAP are forecasting the cash rate to remain at 2.5 per cent in September and only four predict a hike before June 2015.
The low interest rate environment may be one of the reasons housing prices posted their strongest winter gain in seven years.
The RP Data CoreLogic Hedonic home value index of Australian capital city dwelling prices rose by 1.1 per cent in August, RP data said on Monday.
The rise brought the total gain over the June, July and August to 4.2 per cent, the biggest rise over the winter months since 2007.
Annual growth in prices came in at 10.9 per cent, more than double the gain of the 12 months to August 2013, but the gains were not evenly spread across the country.
RP Data research director Tim Lawless said Sydney and Melbourne are driving a two tier market.
The RP Data figures show Sydney home prices rose by 16.1 per cent in the past year, while Melbourne’s were up by 11.7 per cent.
The next strongest markets were Adelaide, Brisbane and Darwin, with price rises averaging between five and six per cent. At the other end of the scale was Canberra, hit by government spending cutbacks, where prices rose by only 1.4 per cent through the year.
Mr Lawless said that now spring has begun there would be a rise in listings of properties for sale over the coming few months, which would be a “real test” for the market.
“Considering the ongoing high rate of auction clearance rates, a generally rapid rate of sale and the ongoing low interest rate environment, it’s likely that dwelling values will rise even further over the next three months,” he said.
MEDIAN HOUSE PRICES IN THE YEAR TO AUGUST:
* Sydney – rose 16.2% to $650,000
* Melbourne – rose 11.7% to $523,750
* Brisbane – rose 5.4% to $445,000
* Adelaide – rose 5.9% to $390,000
* Perth – rose 3.5% to $512,500
* Hobart – rose 2.8% to $310,000
* Darwin – rose 5.4% to $510,000
* Canberra – rose 1.4% to $510,500
* Combined capital cities – rose 10.9% to $520,000
* Rest of states/territories (year to July) – rose 3.6% to $340,000
