A private gauge of inflation has risen by the biggest amount in seven years on the back of higher communications, utilities and housing-related costs.
The TD-Securities-Melbourne Institute inflation gauge jumped by 0.9% during June, the highest ever recorded rise, following a 0.4% increase during June. The annual pace of inflation jumped to 1.9% from 1.4% in June, still below the RBA long-term target of between 2% to 3%.
“The rise in communication charges was extremely large, contributing 0.27 percentage points to the overall increase in the inflation gauge,” the report said.
Despite rising costs in several areas, including the housing category where council rates and charges rose, the prices of fruits and vegetables, financial services and audio-visual and computing equipment dropped.
Annette Beacher, senior strategist at TD Securities, told Reuters that the results indicate a bottoming out in the momentum of inflation.
“Even allowing for those price rises in the last two months, annual inflation is still just below the bottom of the RBA’s target band,” Beacher said.
“Indeed, the RBA can leave the cash rate at 3% for many months as it sees the noise and volatility subside not only in the inflation readings but in activity data more broadly.
Shares up again
Meanwhile, the Australian share market has opened higher today after a day of positive gains in the US, where investors were encouraged by a drop in the number of people claiming jobless benefits.
The benchmark S&P/ASX200 index was up 38.4 points or 0.92% to 4228.9 at 11.35 AEST. The Australian dollar also opened higher to US82c.
ANZ shares rose by 3% to $18.27, while Commonwealth Bank shares gained 1.2% to $42.12. NAB shares gained 2% to $24.24, with Westpac also rising by 1.4% to $21.66.
ANZ is reportedly set to confirm a deal to buy the Taiwanese assets of the Royal Bank of Scotland, in a multi-billion dollar expansion of the group.
A source has told the Dow Jones Newswires that the assets will be the first of several Asian assets to be sold off by the RBS. A spokesperson for ANZ told Business Spectator that discussions with the RBS are “progressing well”.
Meanwhile, Australia’s second-largest power retailer Origin Energy has recorded a 16% increase in fourth quarter production, and said coal steam gas reserves have jumped by up to 50%. The company also said revenue during the quarter was $135 million.
New insider trading regulations
The Federal Government has been prompted to introduce more regulation of insider trading by law advisor the Corporations and Markets Advisory Committee.
“The report recommends that, as a matter of best practice, directors and executive officers should be required to obtain the board’s clearance for dealings in the securities of their company,” a report from the committee said.
“While they should not be prevented from entering margin lending or other loan arrangements as such, a clearance procedure should apply, having regard to possible conflicts of duty and other problems that can arise where securities of the company are used as collateral.”
Wall Street weaker
In the US, stocks rose due to a fall in the number of people claiming unemployment benefits. The Dow Jones Industrial Average added 83.74 points, or 0.92%, closing at 9,154.46 – a new high for the year.
New data from the Department of Labour showed the number of people claiming unemployment insurance benefits rose by 25,000 to a seasonally adjusted 584,000, but the number of people still collecting benefits after an initial first week fell by 54,000 to 6.2 million in the week ending 18 July.
Several analysts said the numbers indicated a stabilisation in the number of people claiming benefits, which points to a slowdown in corporate layoffs.
But the results did little to comfort President Barack Obama, who warned that GDP figures for the second quarter will show economic contraction and said job losses are a “huge problem”.
“I suspect that the GDP numbers will still show that the economy contracted in the second quarter (and) that job loss is still a huge problem,” Obama said.
“We’re not going to rest until we have seen not just a technical improvement in GDP, but until the American people’s job prospects, their incomes have rebounded. And that’s going to take some time,” he said.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
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