Aust. inflation drop continues

Press, 31 January 1986, Page 6

Aust. inflation drop continues

NZPA staff correspondent Sydney

Australia’s Labour Government yesterday reaped the reward for sticking to its economic guns with another drop in the quarterly inflation rate to 2 per cent. After an unusually low 1.4 per cent for the first quarter of 1985, inflation jumped to 2.4 per cent in the June quarter, then slipped to 2.2 by September, giving an annual rate of 8.2 per cent after statistical adjustments.

The result is seen as a vindication of the tough stand that the Federal Treasurer, Mr Paul Keating, has taken on economic policy in the face of sometimes shrill criticism from pundits who started to lose their nerve as interest rates soared and the economy tightened.

While the latest rate was lower than expected and received the applause of the volatile foreign exchange market which sent the Australian dollar climbing ’ against the United States dollars, the doomsayers warned that things would get worse

rather than better. Independent economists say there is still more heat in the economy and that the annual rate will go higher. They point to the effects of several factors which had not worked their way through to the latest figures, and predict inflation will not peak until March or June.

Among them are the flow-on from the 3.8 per cent national wage rise which came late in the December quarter, the delay in the effects on prices of the November devaluation of the dollar, and various Government charges, the joker in the pack being the effects of the drop in world oil prices on the Australian economy. From a New Zealand perspective, the 2 per cent for the December quarter equates closely to the 2.3 per cent for the same period in New Zealand, but while the Minister of Finance, Mr Douglas, predicted in Sydney last year that the annual rate would be in single figures by September, for 1985 it was 15.3 per cent.