House prices are showing signs of strong recovery in most Australian cities. With booming equity markets, asset inflation is alive and well in Australia as in many other nations. This includes China, where goods and services inflation is also, ominously, on the rise.
Scott Murdoch says today’s CPI release will inform the asset markets, essentially because it will have an (excessive in Henry’s view) effect on the outlook for official interest rates:
Today’s inflation number will dictate the direction of domestic financial markets in the short term, as the implications for monetary policy are realised.
Analysts believe a lower quarterly read of price movements across the economy will spur the ASX 200 into 6400 territory.
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The market traded 25 points into that bracket yesterday on the back of a better Wall Street, but 6400 is a strong point for technical resistance levels.
Consumer Price Index
Figures released at 11.30am today finds All Groups CPI rose 1.2% in the June quarter 2007, compared with 0.1% in the March quarter. Headline CPI rose 2.1% through the year to June quarter 2007.
Following two relatively benign quarters, today’s result spells trouble for the Howard Government with the odds of a 0.25% interest rate rise at their August meeting now shortening considerably.
According to the ABS:
The most significant price rises this quarter were for automotive fuel (+9.1%), hospital and medical services (+3.4%), fruit (+8.4%), rents (+1.6%), vegetables (+6.1%), furniture (+3.9%) and house purchase (+1.0%). Price falls for domestic holiday travel and accommodation (-3.5%) and audio, visual and computing equipment (-2.4%) provided some offset to the increases above.
Howard should quit?
Andrew Bolt has delivered the tap on the shoulder – or more accurately a belt between the eyes:
It is unfair, I know. But it’s time John Howard quit. He must quit as Prime Minister not because he’s a failure, but – perversely – because he’s a success.
He must quit because he’s done so well he should be red hot to win the next election.
Instead, every poll this year agrees he’s stumbling to the mother of all hidings.
A crook CPI result might be a more definitive tap, especially coming on top of the Bolt from the Blue.
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