PRESS RELEASE

PRESS RELEASE

EMBARGO: Not for publication before 10.30am Monday 31 October, 2011 TD Securities Melbourne Institute Monthly Inflation Gauge October 2011
The TD Securities Melbourne Institute Monthly Inflation Gauge rose by 0.1 per cent in October, following a 0.1 per cent rise in September. In the twelve months to October, the Inflation Gauge rose by 2.6 per cent, following the 2.8 per cent rise over the twelve months to September. Contributing to the overall change in October were price rises for holiday travel and accommodation, new dwelling purchase by owner-occupiers, and automotive fuel. These were offset by falls in fruit and vegetable price, rent, and furniture and furnishings. Fruit and vegetable prices fell by 4.8 per cent in October, while fuel prices rose 0.9 per cent. The trimmed mean of the Inflation Gauge rose by 0.1 per cent in October, following a similar rise in September. According to Annette Beacher, Head of Asia-Pacific Research at TD Securities, Our TD Inflation Gauge predicted well ahead of the official release that September quarter inflation took a breather after what was a robust rise over the first half of this year. Todays first print for the December quarter is also a fairly benign outcome, with low tradable inflation again keeping overall prices contained. We expect another detailed discussion about inflation at tomorrows RBA Board meeting, comparing near-term inflation outcomes with the outlook for 2012. Only three months ago the RBA Board considered further policy tightening after a strong inflation print, and tomorrow the Board may discuss returning monetary policy to a more neutral stance after a soft inflation print. However, while the retail and housing sectors are operating below trend, there is still the need to accommodate the outsized surge in private business investment that is already well underway. On 30 November, we expect the Private Capital Expenditure survey to confirm that a massive investment wave is supporting activity, which in turn will be boosting exports for decades to come. We believe on balance the prudent path is to leave the cash rate at 4.75% for now. On Friday, the RBA is expected to publish a lower underlying inflation profile than three months ago, however, inflation is still likely to drift towards the top of the RBAs two to three percent target band, implying that slightly restrictive monetary policy should remain in place until the inflation outlook is more benign. added Ms Beacher. The November 2011 TD MI Inflation Gauge will be released at 10.30am AEDT on Monday 5 December 2011.

Contacts:

Annette Beacher Head of Asia-Pac Research, TD Securities Tel: 65 6500 8047 Mobile: 65 9008 3122 Email: annette.beacher@tdsecurities.com

Dr. Michael Chua Melbourne Institute of Applied Economic and Social Research, The University of Melbourne Tel: 03 8344 2144 Email: mchua@unimelb.edu.au

The latest TDMI Monthly Inflation Gauge can be found at http://www.melbourneinstitute.com/miaesr/publications/indicators/tdsec.html