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4 x finance/investment author - 'Get a Financial Grip: a simple plan for financial freedom’ (2012) rated Top 10 finance books by Money Magazine & Dymocks.
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Wednesday, 23 January 2013
Inflation benign but rates to stay on hold for mine
Inflation prints for the December quarter were softer than forecast.
Forget the headline figure of 0.2%, the more important figures are the trimmed mean and weighted median which came in at 0.6% and 0.5% respectively, a little less than forecast.
Given that the news was not far removed from what was expected the Aussie dollar hovers at 105.6 cents.
What this means is that the Reserve Bank simply retains another interest rate cut up its sleeve.
The year on year core inflation of 2.3% is well towards the bottom of their target range of 2-3%.
As for an interest rate cut in February? Well the Sydney Morning Herald got excited, but as things stand I don't think so.
With iron ore prices having recovered substantially and unemployment still remaining relatively low there is a far stronger case for waiting to see what transpires for another month.
As for the much-touted rising house prices?
I'd take the view that an index which shows prices falling by 0.4% one month and looking set to rise by ~1.5% the next tells us more about the volatility of the index than it does about the need or otherwise to ease Australia's monetary policy.
Sydney house prices, for example, were reported as down by 0.9% last month and unit prices down by 1.7% and yet so far this month they seem to be on fire.
Besides, whoever heard of respected economists getting so flustered over 20 days of house price information? It's total madness.
It's all part of the curse of today's greater information flow with deceptively misleading levels of precision reported. Today, property prices are up $110 across the 5 capital cities.
But how many of the 9 million or so dwellings in Australia get sold on a Wednesday in January?