Inflation is likely to hurt Australian economy next month

Australian policy makers showed that the inflation rates are going to hurt the economy next month, along with the natural disaster that caused to rise prices, pushed the Bank will introduce new measures to help the nation to contain inflation appreciation.

Today, Mr. Glenn Stevens, the Governor or Reserve Bank of Australia, announced today that the Bank is to raise the interest rates by 25 basis points at some stage, as the inflation rates are likely to rise more than expected during the next period, pushed the nation’s currency (Aussie) to incline against the majors.

Meanwhile, the Bank decided this month to leave interest rate steady for the sixth consecutive month at the highest level of 4.75% as the Bank aims to support the economy to exit from its recession phase after the first quarter contraction.

Moreover, the Reserve Bank of Australian noted that the July CPI reading will be an important date for Australian policy makers, while the effects that caused by natural disasters, are declining.

Australian consumer prices have surged 1.6% in the first quarter, from three months earlier, the most advance since 2006, driven by fruit and vegetable costs as torrential rains in Queensland state shut coal mines and damaged crops.

At the meantime, the economic recovery in Australian is to rebound in the second half of 2011 as the Asian demand for Australian products is accelerating.

The RBA sees the global economy is continuing its expansion, led by very strong growth in the Asian region. The recent disaster in Japan is having a major impact on Japanese production, and some effects on production of manufactured products. Commodity prices, including oil prices, have generally continued to rise over recent months, pushing up measures of consumer price inflation in many countries.

On the other hand, there are signs confirmed that the Australian recovery is to start its rebound curve after the business investment sector has gained a great performance during the first quarter of the year, which is the third consecutive quarterly increase, affected by the improvements in mining sector.

Furthermore, the government forecasts mining investment of A$76 billion next fiscal year, spurring companies to hire workers and prompting the RBA to predict the unemployment rate will fall to 4.25 percent by December 2013. Australia recorded its biggest annual job growth on record last year before hiring cooled.