Inflation shock points to rate rise: Midday Roundup

Inflation rose by a surprisingly high 0.9% in the June quarter, according to the latest data from the Australian Bureau of Statistics, following a rise of 1.6% in the March quarter.

Economists were expecting a rise of just 0.7% in the June quarter.

The figure means inflation rose 3.6% through the past year to the June quarter, compared with a rise of just 3.3% through the year to the March quarter. The result will put pressure on the Reserve Bank to increase interest rates.

“It’s a nasty looking number, and it’s difficult to say that the March quarter was just an aberration,” Commonwealth Bank chief economist Michael Blythe told Reuters. “It suggests the direction of the next rate move is going to be up, even if there is some uncertainty about when the Reserve Bank might pull the trigger.

“We’ve been saying November and it could be before that, but there are plenty of global issues that will be concerning the Reserve Bank, which means they’ll probably sit put.”

The majority of the rise came from increases in fruit prices, which rose 26.9% during the quarter, while fuel rose 4%, hospital and medical services were up 3.4%, furniture prices rose 6% while deposit and loan facilities increased by 2.1%.

Prices fell 10.3% for vegetables, 6.3% for AV equipment. 1.5% for electricity and domestic holiday travel, 4.6% for milk and 2.3% for personal care products.

Dollar reaches record high

The Australian dollar has reached a record high of $US1.10, rising after the inflation figures were announced on speculation the Reserve Bank will be pressured to increase interest rates.

The dollar has also continued to rise as the possibility of the United States defaulting on its debt grows, with investors flocking to save havens.

Shares weaker after flat US leads

The Australian sharemarket has opened flat this morning after a weak lead from Wall Street, were investors have become nervous after US president Barack Obama promised to veto a new plan that could avoid a debt default.

The benchmark S&P/ASX200 index was down 20.9 points to 4552.49 at 12.10 AEST.

AMP shares rose 0.42% to $4.76, while Commonwealth Bank shares rose 0.12% to $50.28. NAB shares lost 0.68% to $24.65, while ANZ shares have dropped 0.84% to $21.37.

In the United States, the Dow Jones Industrial Average was down 91.50 points, or 0.73% to 12,501.30.

RBA companies tipped to plead guilty to bribe allegations: Report

Companies owned by the Reserve Bank of Australia, Securency and Note Printing Australia, are expected to plead guilty to paying multimillion-dollar bribes to foreign officials to win contracts, The Age reports.

According to the paper, the companies are finalising the details of their legal position, with fresh reports that the companies wired more than $30 million to accounts across the world.

They will appear before the Melbourne Magistrates Court today for a preliminary hearing today.

Samuel says new ACCC chair faces difficult decision on Austar

The outgoing chairman of the Australian Competition and Consumer Commission Graeme Samuel says his successor, Rod Sims, facing a difficult decision on the proposed $2 billion takeover of regional pay TV company Austar by rival Foxtel.

Austar’s major shareholder, Liberty, has complained that Australia is the only market where free-to-air TV channels are not considered direct rivals to pay TV.

Liberty chairman and chief executive Mike Fries told the Australian Financial Review he was shocked by concerns raised by the regulator last week.