 |
||
|
||
 |
|
 "Fact: Consumer spending levels have dropped since the beginning of 2005. The question is "why?". The interest rate rise of .25% had some influence, but shouldn't have had such a significant impact. This article attempts to make some sense of the current market so that we can have an idea of what the future holds" - Mark |
| Prices to rise: consumers |
| By Katharine Murphy |
|
July 15, 2005 CONSUMERS expect to pay more for basic goods and services in the coming year as economists warn mortgage holders not to expect any interest rate relief. A Melbourne Institute of Applied Economic and Social Research survey released yesterday reveals more consumers expect prices to rise in the next 12 months. The increase in numbers for July follows falls in the institute's inflationary expectations index in the previous two months. About 20 per cent of survey respondents expected inflation to be within the Reserve Bank's comfort zone of 2 to 3 per cent, down from 24 per cent the previous month. Fewer people expect prices to fall or remain the same. The Melbourne Institute said the rise in inflationary expectations followed mixed evidence about the state of the Australian economy in recent weeks. The labour market is very strong, with unemployment at historic lows. But the housing cycle is continuing to unwind and retail sales are patchy, according to figures from the Australian Bureau of Statistics. Business and consumer confidence is also soft despite evidence that trading conditions are holding up well for individual firms. Earlier this week, National Australia Bank chief economist Alan Oster said there was now "some doubt" over his forecast that interest rates could be cut early in the new year. A monthly business survey conducted by the NAB also found evidence of rising price pressures in the retail, agriculture and wholesale sectors. Retail petrol prices remain stubbornly above $1 a litre in most metropolitan centres and higher in regional and remote areas. The NAB survey predicted that annual inflation would likely creep towards the upper end of the RBA's comfort zone, lessening the chance of interest rate relief for Australia's mortgage holders. Market economists are looking to the release of official ABS figures on the consumer price index - the key inflation measure - later this month to confirm their forecasts that inflation is on the way up. HSBC chief economist John Edwards said he expected the official inflation figures would come in at the upper limit of the RBA's comfort zone and it was "far more likely that we'll get a rate rise rather than a cut". Reference: The Australian 
|