Prices of goods and services in Australia rose by 0.6 per cent in the September quarter, boosted mainly by hikes in electricity, travel, rents, water and property rates.

However, analysts forecast the consumer price index (CPI) result released Wednesday by the Australian Bureau of Statistics would not be sufficient for the Reserve Bank of Australia (RBA) to reduce the cash rate. RBA Deputy Governor Ric Battellino said on Tuesday that the bank's action on the key lending rate would be largely hinged on the inflation rate.

The September quarter inflation rate is slower compared to the 0.9 per cent CPI logged in the June quarter and weaker compared to the 3.5 per cent inflation rate for the same quarter in 2010 and the 3.6 per cent CPI registered for the past 12 months. It matched analysts' forecast.

The largest rate of price increases were recorded in water and sewerage rates at 8.6 per cent, followed by electricity rates at 7.8 per cent, property rates and charges 5.2 per cent, international holiday travel and accommodation 5.1 per cent and rents 1.2 per cent.

Prices went down by 5 per cent for pharmaceutical products, 3.3 per cent for audio, visual and computing equipment, 2.5 per cent for vegetables, 1.4 per cent for automotive fuel, 1.2 per cent for fruit and 1 per cent for motor vehicles.

With the 0.6 per cent inflation rate, analysts said the RBA would like keep the current 4.75 per cent cash rate for another month, unless European leaders fail to reach a deal on the eurozone's debt crisis which could trigger a sharemarket crash and provide the Australian central bank more scope to reduce the cash rate.

Some groups, however, are pushing for a cash rate cut despite the slower rise in inflation rate to stimulate the Australian economy which is affected by weak consumer confidence and worried over global economic conditions.

Smart Company pointed to the MYOB survey which said that 76 per cent of small and medium enterprises (SME) in the country report that their revenue decline by an average of 27 per cent the past 12 months.

The Web site acknowledged that RBA made it clear their basis in adjusting the cash rate is inflation data and the bank would only reduce the key lending rate if it is certain that CPI is under control. However, Smart Company stressed that the persistent weakness in the SME as evidenced by slumping sales and threats of more employee lay offs could not be ignored by the RBA.

"A Cup Day rate cut is desperately needed. The SME community - and the wider economy - desperately needs some stimulus and the RBA must deliver," Smart Company said.

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