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.
