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PRESS RELEASE PRESS RELEASE FOR IMMEDIATE RELEASE 26 October 2005

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PRESS RELEASE PRESS RELEASE FOR IMMEDIATE RELEASE 26 October 2005 Powered By Docstoc
					                               PRESS RELEASE                 PRESS RELEASE
FOR IMMEDIATE RELEASE:                                                26 October 2005
TD Securities and Melbourne Institute, University of Melbourne
      TD Securities – Melbourne Institute Experimental Monthly Inflation Gauge
                Comparison with the September Quarter 2005 ABS CPI
The Australian Bureau of Statistics Consumer Price Index released earlier Wednesday showed inflation rising
0.94 per cent in the September quarter to be 3.0 per cent higher than a year earlier. This result is close to 1.06
per cent estimate of the inflation rate that was available almost two months ago. It is even closer to the revised
estimate of 1.04 percent we made in September after the Inflation Gauge was moved to be based on the 15th
series CPI weights.

According to Chief Strategist with TD Securities and co-creator of the Inflation Gauge, Stephen Koukoulas,
“The main objective for the TD–MI Monthly Inflation Gauge is to assess inflation trends in a timely manner,
rather than relying on the official quarterly CPI data for information on changes in inflation pressures. The TD–
MI Inflation Gauge, for example, detected an acceleration in inflation pressures starting in the month of June.
Only with the publication of the ABS CPI today, several months after the monthly data detected that
acceleration in inflation, have we seen the official inflation data pick up that increase.”

Mr. Koukoulas also said that, “The three year history for the TD–MI Gauge shows that it is delivering results
that very closely match price levels in the ABS CPI series. There is no doubt that the TD–MI Monthly Inflation
Gauge is now a critical economic indicator for policy makers and financial market participants.”

Dr. Don Harding, an economist in the Economics Department at the University of Melbourne and co-creator of
the Inflation Gauge observed that, “Reductions in administrative prices related to the Pharmaceutical Benefits
Scheme and Medicare bulk billing subtracted 0.06 per cent from the ABS CPI inflation rate of 0.94 per cent for
the September Quarter. After netting out the effect of these administrative prices, the CPI inflation rate was 1.0
per cent for the September Quarter. It is this latter measure of the CPI that is relevant for monetary policy. The
TD–MI Inflation Gauge, and forecasts based on it, is also net of these administrative prices.”

Dr. Harding added that, “Typically published two months in advance of the comparable ABS quarterly measure,
the TD–MI Inflation Gauge has yielded an average error in each quarterly result of about minus nine one
hundredths of one per cent with a standard deviation of sixteen hundredths of one per cent.” The full history of
the TD–MI Inflation Gauge and a comparison with the ABS CPI are in Table 1, over page.

“The TD-MI Inflation Gauge for October will be released on 31 October, providing the Reserve Bank and
market participants with a timely and accurate measure of the current pace of inflation,” Dr. Harding noted.



Contacts:
Stephen Koukoulas: Chief Strategist, Asia-Pacific TD Securities
Tel: 02 9619 8866
Mobile: 0412 313508
Email: Stephen.Koukoulas@tdsecurities.com

Dr. Don Harding: Department of Economics, The University of Melbourne
Tel: 03 8344 7027
Mobile: 0403 753601
Email: d.harding@unimelb.edu.au

Dr. Lei Lei Song: Melbourne Institute of Applied Economic and Social Research, The University of Melbourne
Tel: 03 8344 2145
Email: l.song@unimelb.edu.au

                         The latest TD–MI Monthly Inflation Gauge can be found on
                            http://melbourneinstitute.com/research/macro/tdsec.html
Table 1: TD–Melbourne Institute Experimental Monthly Price Index, comparison with ABS Quarterly CPI
                                                                     TD–MI                        ABS CPI                  Percentage error*
 August 2002                                                         100.00                         100.0
 September 2002                                                      100.18
 October 2002                                                        100.54
 November 2002                                                       100.62                         100.7                        -0.10
 December 2002                                                       101.19
 January 2003                                                        101.39
 February 2003                                                       101.93                         102.0                        -0.09
 March 2003                                                          102.05
 April 2003                                                          102.13
 May 2003                                                            102.18                         102.0                           0.16
 June 2003                                                           102.38
 July 2003                                                           102.34
 August 2003                                                         102.64                         102.6                           0.04
 September 2003                                                      102.88
 October 2003                                                        102.79
 November 2003                                                       103.28                         103.1                           0.17
 December 2003                                                       103.30
 January 2004                                                        103.70
 February 2004                                                       103.84                         104.0                        -0.20
 March 2004                                                          104.20
 April 2004                                                          104.34
 May 2004                                                            104.61                         104.5                           0.06
 June 2004                                                           104.44
 July 2004                                                           104.50
 August 2004                                                         104.80                         105.0                        -0.18
 September 2004                                                      105.05
 October 2004                                                        105.14
 November 2004                                                       105.48                         105.8                        -0.28
 December 2004                                                       105.36
 January 2005                                                        106.09
 February 2005                                                       106.29                         106.5                        -0.19
 March 2005                                                          106.82
 April 2005                                                          107.00
 May 2005                                                            106.83                         107.1                        -0.30
 June 2005                                                           107.28
 July 2005                                                           107.69
 August 2005                                                         108.01                         108.2                        -0.14
 September 2005                                                      108.65
 Average                                                                                                                         -0.09
ABS CPI is based on the Australian Bureau of Statistics Consumer Price Index (Cat. 6401.0). * Percentage error: the percentage difference
between the TD–MI Inflation Gauge and the ABS CPI, that is equal to 100*(TD-MI – ABS CPI)/ABS CPI.

                                                          Comparison of ABS CPI and TD–MI CPI
                                                109
                                                                                                                                    2.9
                                                             TD-MI quarterly inflation (based on middle months)
                                                108
                                                             ABS CPI quarterly inflation
                                                                                                                                    2.4
                Price index (August 2002=100)




                                                107          TD-MI CPI
                                                                                                                                           Quarterly inflation (per cent)




                                                106          ABS CPI
                                                                                                                                    1.9

                                                105
                                                                                                                                    1.4
                                                104

                                                103                                                                                 0.9

                                                102
                                                                                                                                    0.4
                                                101

                                                100                                                                                 -0.1
                                                 Aug-02     Feb-03       Aug-03      Feb-04       Aug-04          Feb-05   Aug-05

				
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