housing survey, page-72

the numbers out today put the pressure on the RBA to lift rates

earlier indications prior to these numbers coming out were that the RBA might wait and see the magnitude of the affect the big 4 banks rate hikes ie.the RBA might not have had to move at all

but clearly given the numbers outlined in the below article and with the USA slowly slipping into recession the RBA might just have to lift rates in order to control any inflationary pressures

Inflation data boosts case for a rate hike
January 14, 2008 10:36am

INFLATIONARY pressures have intensified, boosting the case for an interest rate rise in February, new figures show.

The TD Securities-Melbourne Institute monthly inflation gauge rose 0.6 per cent in December, following consecutive 0.3 per cent rises in October and November.

For the year to December, the inflation gauge rose 3.7 per cent, following a 3.4 per cent rise for the 12 months to November.

The annual reading was the highest since December 2006 and the fourth highest increase in the five-year history of the index.

The underlying or trimmed mean rate rose 0.5 per cent in December, following a 0.4 per cent rise in November, and was up 3.6 per cent over the year.

The TD/MI core inflation measure, which excludes volatile items such as petrol, and fruit and vegetables, rose 0.4 per cent in December, following a 0.1 per cent rise in November.

In the 12 months to December, the core inflation measure rose 3.4 per cent.

"Not only has inflation pressure remained strong, it intensified in December,'' TD Securities senior strategist Joshua Williamson said.

He said the Reserve Bank of Australia (RBA) would be particularly uneasy with both headline and underlying inflation exceeding 3 per cent and with the fact that there are few signs, if any, that inflation pressures are easing.

"Resilient domestic data and confirmation of an inflation break-out strongly advance the case for an increase in interest rates at the February RBA board meeting, even with the financial markets pricing in the risk of a US recession.''

"It would seem that only a bout of even more intense market weakness stands in the way of an interest rate rise on February 5,'' he said.

Contributing most to the overall increase were increases in the cost of petrol, rental accommodation and overseas holiday travel, as well as the November interest rate rise, the figures show.

The price of petrol for the 12 months to December rose 17.2 per cent, while the price of rental accommodation rose 8.6 per cent over the same period - the highest annual increase in rental accommodation prices in the history of the inflation gauge.

"The sharp increase in dwelling rent is evidence of a major inflation problem that is linked to the commodities boom, fiscal policy largesse, a labour market skills and housing shortage,'' Mr Williamson said.

"Given the housing shortage is certain to persist right through 2008 and possibly beyond, the rise in dwelling rent is likely to underpin inflation for some time."

The results point to a rise in the Australian Bureau of Statistics (ABS) consumer price index of 1.1 per cent in the December quarter.

"On the basis of the Inflation Gauge to December, we have increased our forecast of December quarter headline inflation from 0.95 per cent to 1.1 per cent," said Don Harding, an economist at the University of Melbourne and co-creator of the inflation gauge.

"The forecast made above is consistent with net balance statistics that show that price pressure is now broadly based across the economy at levels not previously seen in the five-year history of the inflation gauge.

"This reflects a sustained increase in the breadth and strength of price pressure in the six months to December 2007,'' Dr Harding said.

The ABS data are due on January 23.