Inflation gauge rises just 0.1% in September, Shares move higher: Economy Roundup

A private gauge of inflation increased during September, with economists saying the data will give the RBA more reason to lift rates ahead of tomorrow’s board meeting.

The TD Securities-Melbourne Institute Monthly Inflation Gauge increased by 0.1% in September, following a 0.2% rise in August and a 0.1% increase during July. In the 12 months to September, the Inflation Gauge has increased by 3.2%, above the 2-3% RBA target band.

“Ongoing hawkish rhetoric from senior RBA staff members has placed the markets on notice, and so we believe the RBA should follow up the rhetoric with a 25 basis point tightening after tomorrow’s Board meeting, and then start its Christmas vacation early,” TD Securities senior strategist Annette Beacher said in a statement.

“We expect the variable mortgage rate to be lifted by considerably more than the 25 basis point increase in the cash rate, ameliorating the need for any additional RBA action this year,” she added.

“Whatever the retail bank announcements are, Australia will have the dubious honour of having a restrictive monetary policy stance.”

The data showed prices for automotive fuel, rents and AV equipment declined, while prices for alcohol and tobacco, fruit and vegetables and holiday travel and accommodation increased.

CommSec economist Craig James noted that, “whichever way you cut it, this is a great inflation outcome”.

“Headline inflation is barely moving and once you dig beneath the surface it is even more apparent that prices pressures are contained. The trimmed mean measure of prices has lifted just 0.2% in the space of four months, in effect pointing to a core inflation rate of just 0.6%”

“Current evidence suggests that price pressures and economic activity are softer than most had assumed. Certainly there is a case to be made for delaying a rate hike for at least a month.”

Lithium producer Galaxy Resources will raise $30 million from a Chinese investor to increase its operations at the Mt Cattlin mine in Western Australia.

“A Hong Kong listing could represent the beginning of another exciting growth phase for the Company with potential to deliver value for existing and new Galaxy shareholders,” Galaxy managing director Iggy Tan said in a statement.

“However, at this stage, no decision has been made by the Board to proceed with a listing in Hong Kong and thus to submit the listing application.”

Meanwhile, The Australian has reported that environment minister Tony Burke has delayed a decision on approving coal-seam gas projects in Queensland.

The paper has quoted the minister as saying extensions are necessary “to ensure that I fully consider all relevant matters under the Environment Protection and Biodiversity Conservation Act”.

Shares open higher following good Wall Street data

The Australian share market has opened higher this morning following from solid economic news in the United States late last week, prompting investors’ confidence.

The benchmark S&P/ASX200 index was up 35 points or 0.89% to 4619.9 at 12.20 AEST, while the Australian dollar was hovering at about US97c.

AMP shares have gained 2.7% to $5.26, while Commonwealth Bank shares gained 1.1% to $51.45. Westpac rose 1.6% to $23.29 as NAB rose 1.3% to $25.32.

As reported by the Australian Financial Review, Telstra has said its $1 billion turnaround strategy will be able to deliver a “productivity dividend” with hundreds of millions.

Group managing director for corporate strategy and customer experience Robert Nason told the AFR that the company “needs a shake-up”.

Overseas, state news agencies in China have reported the country’s GDP is expected to rise by 9.5% in 2010, rising from 9.1% in 2009.

Rio Tinto faces rights deadline

Mining giant Rio Tinto has been given until February to five up its rights as part of the Simandou iron ore concession or it will face losing its other stakes, an official has said.

“We have asked in vain for Rio Tinto to give us written confirmation (that) they have given up half of Simandou in accordance with the mining code,” mines minister Mahmoud Thiam told Reuters last Friday.

“If this isn’t done by February 2011, Rio risks losing the other two blocks under its control and could definitively lose its rights to the zone,” he said.

Economic optimism has grown stronger in America as the Commerce Department confirmed on Friday that construction spending rose 0.4% to an annual rate of $US811.8 billion.

The figures revealed investment in private construction fell 0.9% to $US498.2 billion, while spending on private home building fell by 0.3%, following a 3.5% fall in July, as the market adjusts to the loss of the first home buyer’s credit.