Australia inflation up, local dollar hits record

Australian inflation unexpectedly jumped in the June quarter, data showed Wednesday, adding pressure on the central bank to hike interest rates further and sending the local dollar to a record high. The Australian Bureau of Statistics said the consumer price index (CPI) rose 0.9 percent in the three months to June compared with the first quarter, while it was 3.6 percent higher year on year. The figures were above market expectations of 0.8 percent and 3.5 percent respectively. Economists said the data removed any chance of a cut in interest rates -- which some analysts had touted this month as the domestic and global economies show signs of cooling -- and increased the likelihood of a hike. \"Clearly with this sort of inflation there is no respite,\" UBS chief economist for Australia Scott Haslem told AFP. \"The RBA (Reserve Bank of Australia) is going to be looking for the first opportunity, or any signs that growth is stabilising or picking up, to lean against inflation.\" Dubbed the \"Wonder from Down Under\" after it survived the global slump without dipping into recession, the Australian economy already has one of the highest official interest rates in the developed world at 4.75 percent. It was the first to raise rates as it recovered from the downturn, lifting them a total of 175 basis points between October 2009 and November 2010. The central bank aims to keep inflation within a 2.0-3.0 percent range and economists said it would not want to be caught \"behind the curve\" as it was in 2006 and 2007 when interest rates remained at low levels. \"The signal for the RBA is crystal clear and if they are in any way competent, they will hike rates at the next meeting,\" said ICAP senior economist Adam Carr. \"The consequences of them delaying for another six months could be dire in 2012. They really need to get a grip and do what is good for the country.\" Last week the RBA said the eurozone crisis, weaker commodities prices and a global economic slowdown remained a \"significant downside risk\" on the economy that could lead to uneven domestic growth. The RBA comments followed a sharp slump in consumer confidence which prompted major bank Westpac to revise its rates forecast, tipping a 25-point easing in December and further cuts to 3.75 percent by late 2012. Wednesday\'s inflation news sent the Australian dollar to its highest level against the US currency since being floated almost 30 years ago. The \"Aussie\" soared to 110.62 US cents from 109.60 just before the data was released. It was at 110.51 US cents by 0600 GMT. The local unit has been strengthening against the greenback since last year on the back of its resource-rich mining boom, and it has been given extra momentum over the past week due to the debt impasse in the United States. Its previous post-float high of 110.11 US cents was reached on May 3. Haslem said the \"Aussie\" was attractive because the economy was in a \"pristine fiscal condition that is going to hold a triple A status in the case of a potential US debt downgrade\" looming in Washington. Despite devastating summer floods and cyclones, Australia expects growth of 2.25 percent for the year to June, with projects worth Aus$430 billion on the horizon, mostly in mining. Australian Treasurer Wayne Swan said the flow-on impact of the natural disasters were still being felt, with the sharpest increase -- of 26.9 percent -- in the price of fruit over the quarter. The price of bananas are 470 percent higher than before the floods and cyclones, he said. \"Despite of all of this, the fundamentals of our economy remain strong and the medium-term outlook is strong,\" Swan told reporters.