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The chances of keeping Australia's inflation rate low over the medium term are good as the highest borrowing costs in 12 years cool the economy, Reserve Bank Governor Glenn Stevens said.

“This outlook does involve a period of significantly slower growth in demand in Australia,'' Stevens said in a speech to economists in Sydney today. “But controlling inflation has always involved being prepared to slow'' the economy, he said.

The Australian dollar and bond yields fell as Stevens' comments reinforced speculation he won't raise interest rates again following four increases since last August that boosted the benchmark to 7.25 percent. The economy grew at the weakest pace in almost two years in the first quarter as consumers cut spending to pay higher mortgage, fuel and food costs.

“Stevens is growing more confident the central bank's done enough to slow the economy and damp inflation,'' said Peter Jolly, head of research of National Australia Bank Ltd. in Sydney. “The bank has finished its series of interest-rate increases and is on hold for the rest of this year.''

The Australian dollar traded at 97.96 U.S. cents at 1:34 p.m. in Sydney from 98.08 cents before the speech was released. The two-year government bond yield fell 3 basis points, or 0.03 percentage point, to 6.53 percent.

“I think our chances of keeping inflation low over the medium term are good,'' Stevens said.

Inflation Goal

Stevens said the central bank remains committed to its goal of keeping inflation between 2 percent to 3 percent on average, even if annual price gains remain above that threshold for “a pretty long period.''

“We are of course fully aware of the possibility that people may fear that this temporary period of high inflation could, in fact, turn out to be persistent,'' he said.

Australia's annual consumer price index “might rise further before it starts to come down'' after gasoline costs surged above what the bank forecast in May, the governor said.

Annual core inflation accelerated to 4.4 percent in the first quarter, the fastest pace in almost 17 years. The government is due to publish second-quarter figures on July 23.

“We still expect inflation to fall back to 3 percent by mid-2010, and to continue declining gradually thereafter,'' Stevens said payday loans.

There is “pretty clear evidence'' that rising gasoline prices and higher borrowing costs are forcing consumers and businesses to cut spending, the governor said, adding “the extent of that slowing, and its duration, are uncertain.''

Slowing Economy

Consumer confidence slumped to the lowest level in 16 years in July, businesses were the most pessimistic since 2001 in June and home-loan approvals fell by the most in eight years in May, reports last week showed.

“It looks more likely now than it did a couple of months ago that this more moderate track for demand will continue,'' Stevens said. That will “in due course begin to exert downward'' pressure on inflation, he said.

Stevens suggested that the bank is comfortable with its forecast, made in May, that inflation will remain above the ceiling of its target range until the middle of 2010.

“If the May 2008 forecasts turn out to be right, then the current episode would entail nine quarters with year-ended inflation above 3 percent,'' he said.

Such an outcome “would still be consistent in every essential respect with the experience under inflation targeting since it began 15 years or so ago.''

`Exerting Restraint'

Today's comments echo minutes of the bank's July 1 policy meeting, published yesterday, which said interest rates are “exerting the appropriate degree of restraint'' on the economy, which has been expanding for 17 years.

Stevens said inflation is unlikely to be driven higher by wage growth, which has “to date been pretty well controlled.''

A record boom in the jobs market, which saw the unemployment rate fall to a three-decade low of 3.9 percent, ended in May when employers cut workers for the first time in 18 months. The jobless rate was 4.2 percent in June, a report showed last week.

“If the recent signs of moderation in demand for labor continue, which could be expected if overall demand remains on a slower track, that should help to contain any over-exuberance in wage setting,'' Stevens said.

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The U.S. probably lost jobs for a fourth month as the collapse in construction and a slowdown in consumer spending almost stalled growth, economists said before reports this week.

Payrolls fell by 78,000 in April, based on the median forecast in a Bloomberg News survey before the Labor Department's May 2 report. Figures two days earlier may show the economy expanded at a 0.4 percent annual pace from January through March, the smallest gain in five years.

“Despite our forecast for positive growth in the first quarter, we believe the economy has formally slipped into a recession,'' said Ethan Harris, chief U.S. economist at Lehman Brothers Holdings Inc. in New York. “Given the headwinds from the housing and credit markets, we expect spending to remain weak through the end of 2009.'' Harris projects a 0.7 percent growth rate for the first three months of the year.

Economists forecast spending rose last quarter at the slowest pace in 13 years as the loss of jobs, increase in food and energy costs, and drop in property values hurt confidence. The Federal Reserve may lower the benchmark interest rate by a quarter-point to try to stem further erosion in the growth.

The Labor Department's employment report may also show the jobless rate rose to 5.2 percent this month, the highest level in three years.

Factory payrolls fell by 35,000, according to the survey median. Construction firms, retailers and financial-service businesses may also have cut jobs.

Job Losses

Wall Street banks and securities firms, hit by $309 billion in mortgage losses and writedowns, have slashed 48,000 jobs in the past 10 months, led by cuts at Citigroup Inc., Merrill Lynch & Co., Lehman Brothers and Bank of America Corp, according to the Securities Industry and Financial Markets Association.

Merrill Lynch, the third-biggest U.S. securities firm, said April 17 it would cut about 3,000 more jobs after the credit- market crisis forced it to write down about $6.5 billion in debt.

“The employment report will clearly show the economy is in recession,'' said James O'Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut. While a positive reading on first-quarter growth will stoke debate, “ultimately, what will determine whether we're in a recession or not is payrolls,'' O'Sullivan said payday loans.

A build-up in inventories as demand slowed and record exports helped to keep gross domestic product growing. While foreign demand will probably continue to be strong, the increase in stockpiles may mean companies will slow production and spending in coming months, hurting growth.

Contraction Ahead

Merrill Lynch economists last week forecast the economy would shrink at a 2.3 percent annual pace from April through June as consumer spending continues to slow, forcing companies to slash inventories.

“Contrary to popular opinion, the incoming data are, on net, getting worse, not better,'' Merrill's Chief North American Economist David Rosenberg said in an April 24 note to clients.

Fed policy makers are scheduled to meet on April 29-30 to discuss the economy and interest rates. So far this year, central bankers have cut the overnight lending rate between banks by 2 percentage points to 2.25 percent.

“The economy's gone soft, we know that, and the Fed is easing,'' said Kevin Logan, a senior market economist at Dresdner Kleinwort in New York.

Investors have been increasing bets in recent weeks that policy makers will pause after this week's cut, according to Bloomberg data, as concerns over inflation mount.

Spending Slowdown

Consumer spending in the first quarter probably rose at a 0.7 percent annual pace, the smallest gain since the first three months of 1995, according to the median forecast. The Commerce Department's estimate is due April 30 as part of its GDP report.

Manufacturing has also cooled as spending slowed. The Institute for Supply Management's factory index, due May 1, fell to 48 this month from 48.6 in March, the survey showed. A reading of 50 is the dividing line between expansion and contraction.

While down, manufacturing has so far performed better during this slowdown than in previous contractions as demand from overseas continues to grow. In February 2001, a month before the last recession, the institute's index was 42.1.

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Shareholders of BEA Systems Inc. approved its acquisition by Oracle Corp. during a special meeting Friday.

The deal must still be cleared by the European Commission and is subject to other closing conditions.

On Thursday Redwood City-based Oracle (NASDAQ:ORCL) priced a $5 billion sale of notes to help fund the purchase easy payday loans.

San Jose-based software maker BEA (NASDAQ:BEAS) said about 99.9 percent of the shares entitled to vote and present at the special meeting were voted to adopt the merger, accounting for about 68.6 percent of outstanding shares.

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European Central Bank Governing Council member Klaus Liebscher said he still expects euro-region inflation to slow toward the end of the year, even after it reached an “alarmingly high'' rate last month.

“We will certainly see this elevated level for some time,'' Liebscher told reporters today at an event in Dornbirn, Austria. “But I still expect that we'll see a slowing in inflation toward year-end.''

The ECB has held interest rates at a six-year high to fight inflation, which accelerated to 3.5 percent in March, the fastest pace in almost 16 years. While some council members including Germany's Axel Weber have said rates may need to rise if wages are adjusted for faster inflation, others have noted that slowing economic growth may damp price pressures.

The International Monetary Fund, in a background paper obtained by Bloomberg News yesterday, said the ECB has room to cut interest rates as economic growth slows “sharply.'' The Washington-based fund expects the 15-nation euro-region economy to expand 1.3 percent this year, the weakest pace since 2003, as the U.S. housing slump pushes up borrowing costs globally.

European business and consumer confidence declined in March and growth in manufacturing and service industries slowed creditreport.

Slight Deterioration

“The economic outlook has deteriorated slightly,'' said Liebscher, who also heads Austria's central bank. Still, “there is no reason for pessimism.''

The Frankfurt-based central bank last month reduced its forecasts for euro-region economic growth this year to about 1.7 percent from 2 percent. It also raised its 2008 inflation forecast to about 2.9 percent, which would be the highest annual rate since 1993, according to IMF figures. The ECB aims to keep annual gains in consumer prices just below 2 percent.

Crude oil prices have increased 60 percent in the past year, reaching an all-time high of $111.80 a barrel on March 17.

Liebscher said the ECB needs to “do everything to keep inflation expectations from building up.'' Still, inflation has “temporarily climbed to unpleasantly high levels'' and policy makers “don't have a pre-committed opinion'' on interest rates, he said.

The ECB will next decide on rates on April 10.

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The University of Hawaii-West Oahu will offer a new undergraduate degree in health-care administration this fall.

The university says the degree is the only one of its kind in Hawaii, and is designed to address a demand for health-care managers in the state.

The program will lead to a bachelor of arts in public administration with a concentration in health-care administration.

"As we prepare for the new campus in Kapolei, we are expanding our current programs and developing new ones to meet the work-force needs of the state," said Joanne Itano, UH-West Oahu's interim vice chancellor for academic affairs cash till payday.

UH-West Oahu offers classes for undergraduate and graduate degrees at leased space at the Island Pacific Academy in Kapolei. The school plans to move onto its new 500-acre campus near the Kapolei Golf Course in spring 2010.

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