26 October 2011
Yellow Brick Road Executive Chairman Mark Bouris is speaking out regarding today’s historically low Consumer Price Index data and has called on the RBA to give consumers a necessary reprieve by slashing rates on Melbourne Cup Day.
The CPI September quarter average trimmed and weighted mean, which is the RBA’s preferred measure for underlying inflation, came in at 0.3%, the lowest result since Q3 in 1997. This 14-year low almost certainly signifies that the RBA will have no choice but to cut rates on Melbourne Cup Day. Such a low figure comes as a surprise as the general market expectation was 0.6%.
“What today’s consumer price index shows is that consumers are not driving up prices because they’re simply not spending money,” says Bouris. “With the household savings ratio at an all time high of 10.5%, people are using any surplus cash they have to pay down current debt. Today’s CPI is the extrapolation of a three-tier economy which is finally manifesting into spending reductions well beyond expectations. That’s why a rate cut at the next RBA monetary policy meeting is a must.”
Yellow Brick Road has been calling on the Reserve Bank to cut rates since the launch of the company’s RBA Appeal last June and today the need for that call has been vindicated. It has taken five months, but the outcry in Australian suburbs across the country has finally made its way into the statistics.
“Australian consumers are desperate for a break as is evident in the data that has come from the Australian Bureau of Statistics today,” says Bouris. “If there was ever any doubt that the RBA should cut rates, today’s CPI has made the decision for them today.”
The professional markets have responded to today’s CPI announcement with a 10bps reduction in 90-day bank bills from 4.15% to 4.05% and the Australian dollar fell .06 at time of release.
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