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The Reserve Bank of Australia said it will have to tighten monetary policy further at some point as it ramped up its core inflation forecasts for coming years predicting that rising energy, food and living costs and an airtight labour market will combine to stoke price pressures.

In its May statement on monetary policy, the Reserve Bank of Australia forecast core inflation to be right at the top of its 2%-3% target band from the end of 2011 through 2012 and 2013 before reaching 3.25% at the end of 2013.

Australian retail sales fell 0.5% to a seasonally adjusted $20.46bn in March from $20.55bn in February and rose from $20.00bn a year earlier, the Australian Bureau of Statistics said.

Economists surveyed ahead of the announcement on average had expected a 0.5% rise in sales for March. Sales had risen 0.8% in February on month.

The bureau said the the trend estimate for retail sales rose 0.1% to $20.44bn in March from February. The trend estimate further smoothes the seasonally adjusted numbers.

The Reserve Bank of Australia left interest rates on hold, but it also signalled that a policy tightening isn't too far off as inflation looks set to rise further.

The RBA left its cash rate at 4.75%, where it has remained since November 2010.

RBA Governor Glenn Stevens said a mildly restrictive stance of monetary policy "remains appropriate" for now, but he also warned that inflation will rise, even in the face of an Australian dollar at 29-year highs.  

A leading private sector estimate of consumer inflation continued to rise in April, keeping the central bank on track to raise interest rates later this year.

The TD Securities-Melbourne Institute monthly gauge of inflation rose 0.3% in April, following a 0.6% rise in March and 0.2% rise in Feb. Over the year to April, the inflation gauge rose 3.6%, following a 3.8% rate for the year to March.

Global markets (in particular in the US) rebounded strongly in April.  However, the Australian share market was flat with concerns of a high Australian dollar and uncertainty surrounding implementation of the proposed carbon tax.

The All Ordinaries Index retreated 0.6% in April to close at 4,899 points.  Global markets were all higher with the Dow Jones Index gaining 4.0%, the FTSE gaining 2.7%, the Hang Seng gaining 0.8% and the Nikkei 225 gaining 1.0%.

Residential land sales dropped to their lowest level in at least a decade as the cost of blocks increased, a newspaper reported.

The Housing Industry Association RP Data residential land report showed that the volume of land sales dropped to about 11,500 lots in the three months to Dec 2010 from 12,500 in the previous quarter.

The slumping volumes of lot sales come as the weighted price of a residential lot increased 4.1% to $194,161 nationwide.  

Inflation accelerated through March as a series of floods and a category-five cyclone in Queensland continued to drive up prices for fruit and vegetables, according to the TD Securities-Melbourne Institute Monthly Inflation Gauge.

The TD-MI inflation gauge rose 0.6% in March, following a 0.2% increase in February and 0.4% rise in January.

Demand for workers remained strong through the first quarter of 2011, defying floods, fire, storms and a surging dollar.

The total number of job advertisements in newspapers and on the internet rose 1.3% in seasonally adjusted terms in Mar from Feb, ANZ Bank, which compiles the data, said. Job ads over the first quarter were up 5.4% from the prior quarter.

Despite the worst flooding on record in Queensland in Jan and a category-five storm in February, the northern state, famous for its tourism and mining, saw job ads drop 2.9% in Mar, after a 32.6% rise in Feb.

The Japanese earthquake and tsunami disaster dominated financial market news in March. 

The All Ordinaries Index fell by as much as 7% at the height of nuclear concerns at the Fukushima power plant.  The good news was that the Australian share market recovered strongly in the last week of the month and closed up 0.1% at 4,928.6 points. 

Global markets (excluding Japan) followed a similar trend with the Dow Jones Index gaining 0.8%, the FTSE falling 1.4% and the Hang Seng gaining 0.8%. 

An index of job vacancies for skilled workers rose 0.6% in Mar from Feb, but was 10% down from a year ago, the Department of Employment & Workplace Relations said.

The index currently stands at 41.6. Vacancies are counted on the first Saturday of every month. The declining on-year trend is expected to continue as employers move to online advertising and away from newspaper advertising, the department said in the report.