Australia's CPI gained more than expected, sending the
Australian dollar to its highest in two weeks, hence being an obstacle to
further monetary policy easing.
The big price increases were focused in health care, especially
private health insurance, the purchase costs of new homes and a tax-driven
spike in tobacco.
As a consequence, accelerating
inflation poses a dilemma for RBA, as it would prefer a weaker currency due to slowdown
in growth and government spending cuts.
The central bank aims for inflation of between 2 percent and 3
percent on average. Most likely, RBA will keep current rates on hold at least
through 2014 to ensure the recovery remains on track even though inflation is
at the upper end of the target.
RBA is trying to revive the economy away from the mining
regions, where investments are fading, and stimulating growth in manufacturing,
residential construction and retail.
Locking up inflation is the strength of the local dollar which
is suppressing import prices while also forcing domestic businesses to stay
competitive. That is one reason wage growth has slowed to just 2.6 percent a
year, while unit labor costs have gone flat as productivity improved markedly.
