Australia TD-MI inflation gauge falls to fresh low

SYDNEY, Nov 2 - A private gauge of Australian inflation fell in October, driven by a drop in petrol costs, taking the annual pace to its lowest in the seven-year history of the series and well under policy makers' target band.

The TD Securities-Melbourne Institute said on Monday its monthly inflation gauge dipped 0.3 percent in October. The annual pace of inflation slowed to 1.2 percent, from 1.3 percent in September and highs near 5 percent last year.

That was the sixth straight month under the Reserve Bank of Australia's (RBA) long-term target of 2 to 3 percent.

The central bank holds its monthly policy meeting on Tuesday and most analysts expect it will lift interest rates by 25 basis points to 3.5 percent as a hedge against future inflationary pressures.

"Purely on inflation grounds there could be a case for pausing," said TD's senior economist, Annette Beacher.

"However, as the RBA places more weight on Australia's export outperformance and strong trade links with China, a revival of house price inflation and the gradual normalising of market conditions, this means another hike to 3.5 percent remains the highest possible outcome," she added.

The government's measure of consumer prices slowed to its lowest in a decade in the third quarter at 1.3 percent, but measures of underlying price pressure remained stubbornly higher.

TD-MI said contributing most to the overall change in their inflation gauge in October were price falls for private motoring, fruit and vegetables, and financial services.

These were offset by rises in prices for holiday travel and accommodation, meals out and takeaway foods, and books, newspapers and magazines.

The price of automotive fuel fell by 5.8 percent in October, and is over 20 percent below its level of October last year.

Consistent with ongoing Australian dollar strength, the price of tradeable goods is 2.1 percent lower than a year ago

Price pressure eased further in October with prices rising in 22 expenditure groups and falling in 22 for a net balance of zero rises.