SYDNEY: A private gauge of Australian consumer inflation released on Monday showed price pressures were waning faster than previously thought, suggesting there could be more room for policy makers to cut interest rates this week if desired.
The gauge from TD Securities and the Melbourne Institute even held out the chance that underlying inflation might not rise at all this quarter, when compared to the third quarter.
If right, that would be the lowest quarterly change on record, though analysts cautioned that the series has a patchy track record on predicting moves in official price measures.
"Clearly the signal from our gauge is that price pressures faded in the final months of 2011, dragged significantly lower by tradable inflation," said Annette Beacher, TD Securities' head of Asia Pacific research.
The survey's trimmed mean measure of underlying inflation fell 0.2 percent in November, from October, the first drop since late 2009 and led by falls in fruit, fuel and holiday travel.
It also gelled with a separate survey of Australia's services sector which showed a sharp contraction in average selling prices to the lowest since June 2009, led by discounting from retailers.
All of which is important as it was a surprisingly benign reading for underlying inflation last quarter that opened the way for the Reserve Bank of Australia (RBA) to cut rates by a quarter point to 4.5 percent in November, the first easing in over two years.
The central bank holds its December policy meeting on Tuesday and a narrow majority of analysts polled by Reuters expect it to cut again to 4.25 percent.
Interest rate futures are showing around a three-in-four chance of a cut, with investors wagering the debt crisis in Europe will nudge the RBA into taking out some insurance against the risk of slower global growth ahead.
ECONOMY STILL GROWING
"The ducks are lining up for a period of significant weakness in the global economy, and the impact of the European fiscal saga on financial markets continues to reach new depths," said Stephen Walters, chief economist at JPMorgan.
"The RBA will therefore be acting to cushion confidence and provide some support to disposable income as the unemployment rate rises and negative wealth effects accumulate."
Figures on job advertisements out Monday showed virtually no change in November, compared to the month before, which left ads only a shade higher than the same time last year.
Going by history, that would tend to point to only modest jobs growth for the next few months. The government's employment series is out on Thursday and forecasts favour a rise of 10,000 in November, with the jobless rate staying at 5.2 percent.
Wednesday sees the release of Australia's gross domestic product (GDP) figures for the third quarter, where solid growth of around 1 percent is forecast thanks mainly to booming mining investment.
Government data out Monday showed a rundown in inventories may have taken a sizable 1.1 percentage points off GDP in the quarter, yet that was balanced by strength in company sales, profits and wages.
Gross profits at miners were up another 5 percent in the third quarter, on top of a near 17 percent jump the previous quarter, while wages in the sector grew 7.4 percent. Across all businesses, wages were up almost 8 percent on the year and well ahead of inflation. "While the drag from inventories looks larger than expected, a strong rise in industry sales or "production" together with another strong result for profits and incomes, still points to a solid Q3 GDP," summed up Scott Haslem, chief economist at UBS.
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