The consumer price index rose 1.3 percent in the first quarter from the previous three months, when it gained 0.9 percent, the Bureau of Statistics said in Sydney today. The median estimate in a Bloomberg News survey of 22 economists was for a 1.1 percent increase. Prices gained 4.2 percent from a year earlier.
Surging prices leave central bank Governor Glenn Stevens little scope to cut borrowing costs, even amid signs the nation's 16-year economic expansion may slow this year as consumer confidence falters. The bank raised its benchmark interest rate to 7.25 percent in March in a bid to bring inflation back within its target range of between 2 percent and 3 percent.
The Australian dollar rose to 95.04 U.S. cents at 11:41 a.m. in Sydney from 94.63 cents immediately before the report. The yield on the benchmark two-year government bond gained 9 basis points to 6.54 percent. A basis point is 0.01 percentage point.
Today's report includes the Reserve Bank's core inflation measures, which exclude the largest price gains and declines. The weighted-median gauge of inflation rose 1.3 percent in the quarter for an annual increase of 4.4 percent. Economists forecast 0.9 percent and 4 percent respectively.
Rising wages are fanning inflation as mining companies such as Rio Tinto Group and BHP Billiton Ltd. compete for skilled workers to help meet rising demand from China for iron ore and other commodities. The jobless rate was 4.1 percent in March, close to the lowest in more than three decades.
Prices paid to Australian producers rose by a record amount in the first quarter as costs for construction, gasoline and dairy manufacturing surged. The nation's producer price index advanced 1.9 percent, the most since the series began in 1998, a report showed on April 21.
Gasoline costs rose 5.4 percent in the first quarter and pharmaceuticals climbed 13.1 percent, while the cost of buying houses gained 1.7 percent, today's report showed. By contrast, furniture fell 3.6 percent and stereo, TVs and computers costs slid 5.8 percent.
Reports published this month showed home-loan approvals slumped by the most in four years in February, consumer confidence plunged in April to the lowest since 1993, and companies remained pessimistic for a third month in March as concern about the slowing U.S. economy and global credit caused Australia's stock market to record its worst first quarter since 1987.