It’s a good thing that inflation is not a first order issue at the moment for the Reserve Bank to be assessing as it approaches a possible rate cut/rise at its next board meeting on May 5.

As the minutes of the last meeting on April 7, released yesterday, made clear, the bank is looking at growth, demand levels and unemployment as first order issues for its monetary policy stance. Inflation is on the backburner and assumed to fall further over the next quarter or two.

That’s why talk of inflation being back inside the RBA’s target range is of academic interest at the moment: growth and unemployment are by far greater concerns.

But the rise in the quarter, especially by the bank’s two preferred measures, will have been noted and stuck into the “don’t forget” basket.

The March quarter Consumer Price Index from the Australian Bureau of Statistics produced a conflicting outcome: a great result on the headline basis with the CPI rising by just 0.1% in the quarter, to produce a sharp fall in the annual figure to 2.5% from the 3.7% in the December quarter.

But the CPI fell 0.3% in the December quarter with falls in all groups excluding housing, finance and insurance. That fall was reversed in the March quarter, up 0.8% against the 0.7% fall in the December quarter.

On the face of it, it was still a good result, but the way the index movement was influenced tells us a lot about the price pressures still remaining in the economy. They are significant and driven a good deal by Government charges rising, such as electricity and drugs.

That result reinforces the message from the Reserve Bank’s preferred measures which showed no change: if anything a slight rise in some areas, a fall in others, but a rate still too high for the bank’s liking. The RBA’s two measures (The Weighted Median and Trimmed Mean) produced a rise of 1.1% in the quarter, significantly higher than the small gain in the headline CPI.

The RBA said the Weighted Median rose by 1.2% in the quarter (0.9% in the December quarter), and the Trimmed Mean rose 1.0% (0.6). For the full year to March the Weighted Median rose 4.4% (4.5% in the December quarter) and the Trimmed Mean saw a rise of 3.9% (4.2%). That gave an average rise for the year of 4.3%.

Such a rise could have seen a rate rise at the next board meeting (if there hadn’t been one or two in the past few months anyway).

Forecasts from market economists were stray: economists had expected the average of the two RBA measures to rise by 0.8% in the March quarter for an annual rate of 3.9%, while the headline CPI was forecast to rise by 0.5% in the quarter, for an annual rate of 2.9%.

The ABS said that driving the rise was a 13% jump in the cost of pharmaceuticals, a 1.7% rise in the cost of rents; a 7.6% rise in secondary education fees (private schools), a 6% rise in the cost of vegetables and a 3.6% rise in the cost of electricity.

“The most significant offsetting price falls this quarter were for deposit and loan facilities (-14.1%), automotive fuel (-8.1%), domestic holiday travel and accommodation (-5.1%) and overseas holiday travel and accommodation (-4.0%),” the ABS said.

The ABS said at the “All groups level, the CPI rose in all capital cities this quarter, with the exception of Perth which fell 0.1% and Adelaide which recorded zero percentage change. Among the cities recording a positive movement, Canberra registered the highest increase with a rise of 0.4%, while all other cities were in the range of 0.1% to 0.2%.

The food group recorded the largest positive contribution in all cities with the exception of Darwin which had food as the second highest positive contributor.

At the eight capital cities level the health group was the second highest positive contributor to the quarterly movement showing increases in all cities.

The housing group was the highest positive contributor to the Darwin movement with an increase of 1.8% this quarter. Housing prices rose across all other cities rose during the quarter, making it the third most significant positive contributor to the quarterly movement.

The education group also rose across all cities, with the highest increase in Hobart where it was the second highest contributing group after food.

The financial and insurance services group was the largest negative contributor for all cities. This was followed by the transport group which also fell in all cities.

The only city to see a decrease this quarter was Perth. This decrease was mainly due to the larger decrease in transportation than seen in other cities. Perth also showed a relatively larger decrease for clothing and footwear, where most other cities recorded small price increases.

Over the twelve months to March quarter 2009, the All groups CPI rose in all capital cities with the increases ranging from 2.1% in Melbourne to 3.1% in Brisbane. The higher result in Brisbane is largely due to stronger than average rises in housing and household contents and services. In addition, the offset provided by transportation was relatively weaker compared to other cities.

Meanwhile, there was the slightest hint that Japan’s dramatic export slide is easing. March exports fell 45.6%, down from February’s 49.4%, ending a five month period of accelerating falls.

But it wasn’t enough to stop Japan from reporting a trade deficit for the first financial year in 28 years.

It was still bad though, with exports to China down 39.5%, Australia 54.9%, the US, down 51.4% and Western Europe, 51.8%.

The figures, from Japan’s Finance Ministry, showed a sharp fall in the overall trade balance, down 99% in the month.

For the Japanese 2008 fiscal year, which ended on March 31, exports were down 16.4% and imports were off 4.1%, giving the country a trade deficit of 725.3 billion yen ($A10.32 billion) — its first shortfall for a fiscal year since 1980.