Just when we appear to have got over the federal budget nightmare, new inflation figures risk sending a renewed shiver through the economy.
The rate of inflation looks set to top three per cent for the first time in nearly three years.
Thankfully, economists doubt that it will stir the Reserve Bank into lifting interest rates anytime soon.
That’s because underlying inflation – the central bank’s preferred measure that gauges whether rising price pressures have become embedded in the economy – is still expected to remain within the RBA’s two to three per cent inflation target band.
Economists expect the annual rate of the consumer price index to rise to 3.1 per cent from 2.9 per cent three months earlier, largely as a result of price increases in the final six months of 2013.
They expect Wednesday’s CPI release will show a benign 0.6 per cent rise for the June quarter.
Underlying inflation measures are expected to also average a 0.6 per cent increase to 2.7 per cent over the year.
Such predictions come as consumer confidence lifted again in the past week, coinciding with the Abbott government’s success in finally repealing the carbon tax.
Other ructions in the Senate mean parents will still get their SchoolKids Bonus payment in July.
The weekly ANZ-Roy Morgan consumer confidence reading has jumped about eight per cent in the past fortnight, almost completely reversing the sharp deterioration in the weeks surrounding the May budget.
“This is a very encouraging sign that the ‘sticker shock’ from the budget was temporary,” ANZ senior economist Justin Fabo said.
Treasurer Joe Hockey continues to urge the Senate to pass his budget measures and abolish the mining tax, arguing both were about jobs and prosperity.
He says if any evidence is needed, look no further New Zealand, where he is visiting on official business.
“They are getting to surplus and they have a growth trajectory and a jobs trajectory that Australia can be jealous of.”