australia has an inflation problem

Sydney - Wednesday - January 23: (RWE Aust Business News) -
The latest CPI onfirms that Australia has an inflation problem, an
economist maintained.
The CPI rose 0.9 per cent in the December quarter to be up 3pc
over the year, the Australian Bureau of Statistics said.
The largest contributors to the increase were petrol, deposit and
loan facilities, house purchase costs, rents, domestic travel and
accommodation and other financial services.
This was partly offset by lower prices for fruit, vegetables,
pharmaceuticals and audio, visual and computing equipment.
The RBA's statistical measures of core inflation were much higher
than expected, averaging 1.05pc in the quarter and 3.6pc over the year,
ANZ Bank head of Australian economics, Tony Pearson, said.
"Underlying inflation is now running at the strongest pace since
the commencement of inflation targeting by the Reserve Bank in the early
1990s," he said.
"The Reserve Bank has little choice but to raise rates by a
further 25 basis points at the February meeting.
"The problem in Australia is essentially that growth is too
strong, not too weak, and that the economy is hitting capacity
constraints.
"This is the fundamental source of the inflationary pressures.
"The Reserve Bank will certainly take into consideration recent
renewed volatility in financial markets and the deterioration in global
growth prospects.
"However, the global environment would need to deteriorate
substantially from here for the medium-term inflationary outlook to
materially change."