Inflation rate moderates in March quarter


CPI rose by 0.1 percent in the March quarter to be 2.5 percent higher through the year, slowing from 3.7 percent in the December quarter

The Consumer Price Index (CPI) rose by 0.1 percent in the March quarter to be 2.5 percent higher through the year, slowing from 3.7 percent in the December quarter.

This is the first time since late 2007 that headline inflation is within the RBA’s target band of 2 to 3 percent.

Underlying inflation was 1.1 percent in the quarter but slowed to 4.2 percent through the year.

Treasurer Wayne Swan says the moderate outcome for headline inflation was underpinned by a number of price falls.

A 14.1 percent reduction in prices of deposit and loan facilities reflects in large part the fact that mortgage interest rates fell more than deposit rates.

Automotive fuel prices fell by 8.1 percent in the quarter, driven by falling international oil prices, to be 16.7 percent lower through the year.

Prices for education, health care, food and rents increased strongly in the March quarter. Education prices rose by 5.4 percent, due to a seasonal increase in fees from the start of the new school year.

Similarly, seasonal factors associated with the Pharmaceuticals Benefits Scheme were responsible for health price increases of 4.4 percent. The rise in food prices was widespread across food categories, with a large contribution from vegetables.

"Today’s CPI result shows that inflationary pressures continue to moderate in response to the global recession and its effects on the domestic economy.

"Looking forward, a further easing in inflationary pressures is expected as the effects of the global recession continue to impact on the domestic economy," Swan says.

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