Australia’s inflation gauge rises in June on higher costs of petrol, food

A private sector gauge of Australian inflation rose sharply in June as higher costs of fuel and food pushed up consumer prices, though underlying measures of inflation remained calmed. This leaves room for further rate cuts by the Reserve Bank of Australia in the near term, or at least by September.

The Reserve Bank of Australia (RBA) will hold its monthly policy review on Tuesday and is widely expected to hold rates for the moment at a record low of 1.75 per cent.

The Melbourne Institute's monthly inflation gauge for June climbed 0.6 percent, after a very soft 0.2 percent decline in May. The annual inflation rate picked up to 1.5 percent, from one percent, but was still below the RBA's long-run target band of 2 percent to 3 percent.

The trimmed mean measure edged up a more modest 0.2 percent, while the annual pace ticked up to 1.2 percent. Excluding petrol and fresh fruit and vegetables, inflation rose 0.2 percent in the month and 1.8 percent for the year.

The rise in June prices is attributable to automotive fuel, besides, rise in cost of holiday travel, accommodation, fruits and vegetables. However, the rise was partly offset by falls in clothing and footwear and insurance and financial services.

"Given this rise, it seems unlikely that we will get a repeat of last quarter’s negative CPI result for the current quarter," said Sam Tsiaplias, Senior Research Fellow, Melbourne Institute.