A private-sector measure of Australian inflation rose 0.2% in February as housing rents recorded their biggest increase in the history of the series.
The TD Securities-Melbourne Institute Monthly Inflation Gauge was up 3.4% on February last year, picking up from 3.1% in January.
Contributing most to the overall increase were rises in the cost of dwelling rents, takeaway and fast foods and alcoholic drinks. Price decreases in fruit and vegetables, audio, visual and computing equipment and newspapers and magazines partially offset these increases.
The rise in dwelling rent was the largest in the four and a half-year history of the TD-MI gauge and fits with anecdotal evidence of low vacancy rates and strong demand from renters.
The price of bananas fell by 35% during February, finally unwinding almost all the huge gains seen last year when a storm wiped out the Queensland banana crop.
The TD-MI gauge showed core prices, excluding volatile fuel, fruit and vegetables, rose a larger 0.5% in February. Core inflation for the year accelerated sharply to 3.5%, from 3.0% in January.
The trimmed mean of the TD-MI gauge, a statistical measure of underlying inflation, increased 0.3% in the month. Growth for the year climbed to 3.1%, from 2.3% in January. The Reserve Bank of Australia focuses on its own trimmed mean measures of consumer price inflation to set monetary policy.
Based on the February inflation gauge, TD-MI forecast the official consumer price index (CPI), due out on April 24, would rise by 0.6% in the first quarter.
The CPI fell by 0.1% in the fourth quarter while underlying inflation rose by less than expected, greatly lessening the risk of further interest rate increases. "The monthly inflation data suggest that the low CPI result for the December quarter was likely to be an aberration," said Stephen Koukoulas, chief strategist at TD Securities. "Of concern for the inflation performance is the lift in dwelling rent which is likely to remain a factor underpinning the CPI for some time," he added.