Date: May 05 2012
A LACK of government funding is the only thing stopping the Reserve Bank receiving more frequent inflation figures to consider at its monthly interest rate meetings, leaving the RBA as the only G20 central bank working with out-of-date data.
The Reserve Bank, which this week was criticised for being behind the inflation eight ball, relies on quarterly inflation data rather than monthly figures.
Before this week's decision to cut rates, it endured a three-month vacuum in which no new official inflation figures were available, even though fresh debt turmoil in Europe had dented local confidence.
Economists said that meant the bank was caught on the hop by a large drop in inflation in the first three months of the year, leading it to cut the official cash rate by an unusually large 0.5 percentage points this week.
In a 2010 submission to the 16th series review of the consumer price index, the RBA said it was ''strongly of the view'' that a monthly CPI constituted ''best practice'' and that more frequent data on prices would help it make better assessments of inflation trends.
Business leaders have been calling for a cut in the official cash rate for months, citing weak economic conditions and poor business confidence.
At its April board meeting, the RBA decided to wait for ''comprehensive new data on prices'' to be published in May before considering a change in monetary policy.
The Australian Bureau of Statistics estimates it would cost $6 million to start publishing a monthly CPI series, with an additional annual $15 million to keep it going.
The government-funded ABS collects price data on many items each month but publishes it only quarterly because of the expense.
The consumer price index - a key measure of inflation - rose in the March quarter by 0.1 per cent, well below economists' expectations, taking annual inflation to just 1.6 per cent. The RBA's target band for inflation is 2 to 3 per cent.
Federal Treasurer Wayne Swan would not say whether he was satisfied with the current quarterly CPI series or whether he thought the CPI should be published every month.
Nor would he comment on whether he thought the ABS was adequately funded.
''Decisions about the ABS's work program and priorities are a matter for the ABS as an independent statutory body,'' said a spokesman for the Treasurer.
At the 16th series review, the Reserve Bank, the Australian Business Economists and Federal Treasury supported the idea of a monthly inflation reading but Treasury said it was concerned that more frequent publication would reduce the quality of the series.
The International Monetary Fund and the International Labour Organisation recommend monthly CPI series.
The ABS estimates it would take two to three years to get a monthly series up and running.
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