Inflation has continued to rise, signalling the beginning of the end for the record low cash rate.
The TD Securities Melbourne Institute monthly inflation gauge rose by 0.2 per cent in March and by 2.7 per cent in the 12 months to March – the same as in February.
The increase was driven by price rises for fruit, vegetables, meat, seafood, travel and accommodation and offset by falls in rents, petrol and audio, visual and computing equipment and services.
The March figures would bring little comfort to the Reserve Bank of Australia, TD Securities head of Asia-Pacific research Annette Beacher said.
“We suspect the recent and unexpected pickup in inflation has prevented the RBA from talking down the currency in recent months,” Ms Beacher said.
“The RBA is increasingly seeing the glass as half full, with the turnaround in leading indicators such as job vacancies and building approvals suggesting that non-mining activity is recovering.
“Inflation pressures are clearly building up, neither due to `noise’ nor proof that Australia’s speed limit on growth is below three per cent.
“We see the August monetary policy testimony as the perfect timing to announce that emergency cash rates are no longer required, paving the way for at least one small upward adjustment by year-end.”
The trimmed mean of the inflation gauge rose by 0.1 per cent in March, following a rise of 0.3 per cent in February, to be 2.7 per cent higher than a year ago.
