The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
Picture of Wayne Swan

Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

23 January 2013

Consumer Price Index - December Quarter 2012

Today's data shows that inflation remains very well contained, with both headline and underlying inflation moderating in the December quarter.

Contained inflation is not only a reminder of Australia's strong economic fundamentals, but it confirms the modest impact of the carbon price on consumer prices - in line with Treasury's estimate.

The Consumer Price Index (CPI) rose 0.2 per cent in the December quarter 2012, after a number of one-off factors boosted CPI by 1.4 per cent in the September quarter 2012. Headline inflation was 2.2 per cent through-the-year to December, remaining at the lower end of the Reserve Bank's target band. This result follows headline inflation of 2.0 per cent through-the-year to September.

Underlying inflation was 0.5 per cent in the December quarter, down from 0.7 per cent in the September quarter. Underlying inflation moderated to 2.3 per cent through-the-year to December, down from 2.4 per cent through-the-year to September.

The December quarter outcome provides further evidence that there has been no significant broad-based increase in consumer prices following the introduction of the carbon price on 1 July 2012. The results are consistent with Treasury modelling, which forecasts the CPI to increase by 0.7 per cent over 2012-13 due to the introduction of the carbon price, with much of the impact already occurring in the September quarter 2012.

The Government is providing assistance to households to meet the modest impact of the carbon price through a significant tax reform package and increases to payments including pensions, allowances and the Family Tax Benefit.

Today's result partly reflects some seasonal factors which put downward pressure on inflation. In particular, health prices declined by 0.9 per cent in the quarter, largely driven by a seasonal decline in pharmaceutical prices (down 3.5 per cent). Food and non-alcoholic beverages prices also declined by 0.1 per cent in the quarter, driven by a 5.7 per cent fall in vegetable prices. The decline in vegetable prices detracted 0.1 percentage points from quarterly CPI inflation, and reflects an improvement in growing conditions which boosted the supply of certain crops.

The contributors to headline inflation in the quarter included a seasonal increase in domestic holiday travel and accommodation prices, which rose 6.2 per cent. Transport prices were also boosted by a rise in fuel prices, which rose 2.6 per cent in the quarter.

Despite patchy conditions in some parts of the economy, Australia's impressive economic scorecard stands in stark contrast to other developed economies. We have contained inflation, solid growth, low unemployment, strong public finances and low interest rates.

The Government remains focused on building on Australia's economic success, by bedding down the reforms that build the high-skilled, high-productivity, low-pollution economy of the future.