October 28th 2009
CPI rise makes rates hike "a sure bet"
In the following report, Townsville based economist, Colin Dwyer from DS Enconomics, looks at the latest inflation figures and their likely impact on mortgages and other costs of living in north Queensland.
The ABS Consumer Price Index rose 1.0% in the September quarter 2009, compared with a rise of 0.5% in the June quarter 2009. In annual terms the CPI rose 1.3% through the year to September quarter 2009, compared to an annual rise of 1.5% to June quarter 2009. Core inflation rose 0.8% for the September quarter and 3.2% for the year.
The CPI figures make a 0.25% rate rise a sure bet on Melbourne Cup. We expect further rate rises in December and February of probably 0.25% each. Combined, that will make a rise of 1% in the cash rate by February.
In Townsville home purchase costs have increased as interest rates start to rise again and the first home owners grant was reduced in October. The 0.25% cash rate increase in October represents $52 a month increase in repayments for a $250,000 loan.
Rents for 3 bed room houses have remained static over the year at $320 per week. But rents for two bedroom units have risen 5.7% for the year to $280/week or by $780 per annum.
Basic household items such as Electricity, Water and Sewerage prices are likely to have increased in line or even more than the national growth of 11.4% and 14.1% for the quarter.
On the positive side, the recent appreciating Aussie dollar has helped reduce Unleaded petrol by about 10c/L in Townsville since early September. This has taken us back to pre fuel tax rebate prices of around 116c/L. This performance could be maintained if world oil prices remain at current levels. Fruit and vegetable prices have dropped by 5.4% and 5.6% respectively.
Colin Dwyer, DS Economics
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