Posted on The Australian (27/10/2011) on 27/10/2011 at 3:23 AM (Cannot post as non-subscriber)
Commenting on “Low inflation raises case for RBA rate cut”
http://www.theaustralian.com.au/business/economics/low-inflation-raises-case-for-rba-rate-cut/story-e6frg926-1226177799948
The table headings are incorrect - Quarterly change should be Annual change, and vice versa. Please refer to http://www.abs.gov.au/ausstats/abs@.nsf/mf/6401.0
The problem with inflation calculation tied with CPI is that they are not totally correlated. Basing on inflation rate to adjust interest rate by RBA is unrealistic and to some extent nonsensical.
Most services are labour related and provided locally. In almost all cases, services increase in absolute dollars each quarter, and are based on our own currency. The utility prices have been on the increase to the point where many cannot afford such basic needs in everyday living.
Product supply / provision are influenced by currency exchanges, parity, and supply / demand of the products. For the example, the rise of fall of petrol prices are not caused by local supply and demand but parity prices and import prices beyond our control.
I have written often on the issue that increase in utility prices is NOT inflation. Users of utility do not push up the price due to additional demand, and it is through no fault of theirs that they copped double whammy - one from price rise, and two increases in interest rate to curb "inflation".
Commenting on “Low inflation raises case for RBA rate cut”
http://www.theaustralian.com.au/business/economics/low-inflation-raises-case-for-rba-rate-cut/story-e6frg926-1226177799948
The table headings are incorrect - Quarterly change should be Annual change, and vice versa. Please refer to http://www.abs.gov.au/ausstats/abs@.nsf/mf/6401.0
The problem with inflation calculation tied with CPI is that they are not totally correlated. Basing on inflation rate to adjust interest rate by RBA is unrealistic and to some extent nonsensical.
Most services are labour related and provided locally. In almost all cases, services increase in absolute dollars each quarter, and are based on our own currency. The utility prices have been on the increase to the point where many cannot afford such basic needs in everyday living.
Product supply / provision are influenced by currency exchanges, parity, and supply / demand of the products. For the example, the rise of fall of petrol prices are not caused by local supply and demand but parity prices and import prices beyond our control.
I have written often on the issue that increase in utility prices is NOT inflation. Users of utility do not push up the price due to additional demand, and it is through no fault of theirs that they copped double whammy - one from price rise, and two increases in interest rate to curb "inflation".
