ID :
196577
Fri, 07/22/2011 - 14:15
Auther :
Shortlink :
https://oananews.org//node/196577
The shortlink copeid
Strong dollar keeps lid on import prices
A strong Australian dollar may be crippling some sections of the economy, but new data shows the currency is helping to keep the lid on imported inflation.
The economy heads into a critical stage next week with the release of the consumer price index (CPI) for the June quarter, coming after the sharp rise in prices in the March quarter.
Minutes from the Reserve Bank's July board meeting, released this week, said the CPI "would be important in helping to shape views about inflation and therefore the future path of interest rates".
Still, it may draw comfort from Australian Bureau of Statistics data on Friday showing import prices grew just 0.8 per cent in the June quarter.
Its import price index actually fell 1.0 per cent for the year.
Commonwealth Bank senior economist Michael Workman said a higher dollar has suppressed the impact of higher world oil prices.
At the same time, the bureau's export price index jumped 6.0 per cent to be 10.5 per cent higher over the year.
In other words, Australia's terms of trade has risen almost 12 per cent in the past year.
"The rest of the world faces higher inflation pressures because of rising mineral, energy and food commodity prices. But, for Australia, those rising commodity prices are delivering an extraordinary increase in national income," Mr Workman said.
The Australian dollar jumped to a 10-week high above 108 US cents, gaining around one cent after European Union leaders agreed on Thursday to a second bailout for Greece worth 109 billion euros ($A145 billion).
Banks and other private investors will contribute 37 billion euros ($A50 billion) to the package.
EU leaders also agreed to strengthen its European Financial Stability Facility to protect the region against the problems of its weakest members, especially Greece, Portugal and Ireland.
"For once, (EU Leaders) did not disappoint, providing a substantial package to improve the debt sustainability of Greece and in the hope of preventing the euro area crisis from escalating further," RBC Capital Markets European economist Gustavo Bagattini said.
However, the debt problems in the US have yet to be resolved and could still see the world's biggest economy default on August 2.
Ratings agency Standard & Poor's again warned that if politicians cannot reach a deal it could downgrade the US debt rating.
"We believe any additional stresses caused by a protracted stand-off in the US would likely amplify already tense market conditions in Europe," the ratings agency said.
It said a US default could be "substantially more serious" than the global financial crisis in 2008.
Treasurer Wayne Swan said the events in Europe and the US are creating a great degree of uncertainty.
"In that environment there are risks in the international economy ... the sooner they resolve their issues the better," he told reporters in Brisbane on Friday.
But opposition finance spokesman Andrew Robb said the treasurer was the last person to offer advice.
"Wayne Swan hasn't even got the confidence of the Australian public, so he is hardly in a position to lecture the world on how they should be managing their debt," he said in a brief statement.
"He should get his own backyard in order," noting that under Mr Swan's watch the budget had gone from a zero-debt position to one where he has raised the Commonwealth debt ceiling to a record $250 billion.
The economy heads into a critical stage next week with the release of the consumer price index (CPI) for the June quarter, coming after the sharp rise in prices in the March quarter.
Minutes from the Reserve Bank's July board meeting, released this week, said the CPI "would be important in helping to shape views about inflation and therefore the future path of interest rates".
Still, it may draw comfort from Australian Bureau of Statistics data on Friday showing import prices grew just 0.8 per cent in the June quarter.
Its import price index actually fell 1.0 per cent for the year.
Commonwealth Bank senior economist Michael Workman said a higher dollar has suppressed the impact of higher world oil prices.
At the same time, the bureau's export price index jumped 6.0 per cent to be 10.5 per cent higher over the year.
In other words, Australia's terms of trade has risen almost 12 per cent in the past year.
"The rest of the world faces higher inflation pressures because of rising mineral, energy and food commodity prices. But, for Australia, those rising commodity prices are delivering an extraordinary increase in national income," Mr Workman said.
The Australian dollar jumped to a 10-week high above 108 US cents, gaining around one cent after European Union leaders agreed on Thursday to a second bailout for Greece worth 109 billion euros ($A145 billion).
Banks and other private investors will contribute 37 billion euros ($A50 billion) to the package.
EU leaders also agreed to strengthen its European Financial Stability Facility to protect the region against the problems of its weakest members, especially Greece, Portugal and Ireland.
"For once, (EU Leaders) did not disappoint, providing a substantial package to improve the debt sustainability of Greece and in the hope of preventing the euro area crisis from escalating further," RBC Capital Markets European economist Gustavo Bagattini said.
However, the debt problems in the US have yet to be resolved and could still see the world's biggest economy default on August 2.
Ratings agency Standard & Poor's again warned that if politicians cannot reach a deal it could downgrade the US debt rating.
"We believe any additional stresses caused by a protracted stand-off in the US would likely amplify already tense market conditions in Europe," the ratings agency said.
It said a US default could be "substantially more serious" than the global financial crisis in 2008.
Treasurer Wayne Swan said the events in Europe and the US are creating a great degree of uncertainty.
"In that environment there are risks in the international economy ... the sooner they resolve their issues the better," he told reporters in Brisbane on Friday.
But opposition finance spokesman Andrew Robb said the treasurer was the last person to offer advice.
"Wayne Swan hasn't even got the confidence of the Australian public, so he is hardly in a position to lecture the world on how they should be managing their debt," he said in a brief statement.
"He should get his own backyard in order," noting that under Mr Swan's watch the budget had gone from a zero-debt position to one where he has raised the Commonwealth debt ceiling to a record $250 billion.
