By Greg Peel

TD Securities' headline inflation gauge rose 0.3% in June following a 0.5% rise in May and a 0.4% rise in April. June represented the eight consecutive month of increase.

The result surprised the economists at Westpac. While the pace of growth has slowed slightly, the rush of major retail store discounting in June might have been expected to have a bigger impact on the numbers. Normally stores discount in July when they have their “stock-take sales”, whereas this year it seemed everyone was having an end-of-financial-year clearance. The biggest impact in the numbers were nevertheless rises in the prices of fruit and vegetables, travel and accommodation and insurance.

The annual headline rate of inflation eased from 3.7% to 3.6% in June, TD notes, but is still well above the RBA's 2-3% comfort zone. The RBA nevertheless prefers to follow the trimmed mean of inflation, which TD calculates as having risen 0.1% in June to an annualised rate of 3.2% - still above.

Westpac notes that while the rate of inflation growth has slowed slightly, the June numbers indicated a greater breadth of price rises.

ANZ reports the number of job vacancies advertised in newspapers and on the internet rose 2.7% in June. The May rise was also 2.7%, but only after ANZ revised its original estimate down from 4.3%.

Job ad numbers are now 32.2% higher than a year ago, notes ANZ, and 34.6% higher than the July 2009 trough. The monthly pace of growth slowed from 2.4% in May to 1.8% in June, but the economists suggest the June result is still “firmly positive”. The annual growth rate is now 30.2% which is well above average and the highest level since December 2007.

There are some in the market who believe the RBA will be thinking about cutting its cash rate in light of a slowing global economy, albeit probably not tomorrow. The above data indicate good reason why the RBA will stay on hold for the foreseeable future as a balance between global and local forces.

The swing factor is iron ore and coal prices. It remains to be seen whether the next round of quarterly contracts with China will show any great drop. In the short term, steel demand is falling. In the longer term, China is still growing its domestic economy at a rapid pace. Bulk commodity prices are a significant factor in the RBA's monetary policy considerations, along with general price inflation.

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