The Australian dollar has soured through the US 108 cents mark, while the Australian CPI figures are up. The two have been connected in some commentary, as though the markets have interpreted the CPI increase as a reason for buying the Ozzie. I must say that this strikes me as a bit odd.
I will comment on the currency in a later post. Looking at the trade figures, I am cautious about the sustainability of the increase, accepting that the market does as the market does. In this post, I want to look at the CPI numbers. Those who are interested can find the Australian Bureau of Statistics release here.
The headline number was a CPI increase in the March quarter of 1.6% bringing the annual inflation rate to 3.3%. The largest group increases for the quarter were education (5.7%), health (3.9%), food (2.9%) and transportation (2.7%). Food was influenced by the floods, transportation by global oil price increases.
The rising Australian dollar is keeping downward price pressure on imports of fuel and final goods. However, because Australia imports so many intermediate goods, the high dollar is also increasing producer prices, increases that feed through into final goods prices.
At the moment, the concept of a patchwork economy is popular in this country, reflecting the fact that the combination of mining boom and consequent high dollar is having differential effects across the country. Some parts of the economy are effectively in recession, others booming. The on-ground impacts vary greatly depending on the locale economic mix.
