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Benign inflation has cleared the way for another rate cut, one economist has claimed.
AMP’s chief economist Shane Oliver said headline inflation actually came in a bit weaker than expected, sitting at 0.4 per cent quarter on quarter, while underlying inflation measures showed an average gain of 0.6 per cent quarter on quarter.
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“While tradable inflation rose 0.3 per cent in the June quarter, possibly reflecting the recent fall in the Australian dollar, non-tradeable inflation only rose 0.5 per cent,” Mr Oliver said.
“Moreover the lack of pricing power in the economy was highlighted by the just 1.5 per cent annual increase in the price of goods and services in the market sector of the economy (after excluding volatile items). The bottom line is that inflation is comfortably contained in the [Reserve Bank's] 2 to 3 per cent inflation target range and we view the benign outcome as clearing the way for the RBA to cut interest rates again next month.”
“The only complication is that if the government declares an August 31 election, the RBA may prefer to wait till September, but either way, interest rates in Australia are likely headed lower.”
