Today's Consumer Price Index (CPI) shows that inflation remains well contained, with the All Groups CPI increasing by 0.7 per cent in the December quarter 2002, and 3.0 per cent through the year.
The drought, which is severely affecting large parts of Australia, has clearly contributed to higher food prices in the December quarter 2002 with fruit and vegetables prices increasing by 4.2 per cent and dairy prices increasing by 2.1 per cent in the quarter. In addition, bread and cereals prices increased by 2.2 per cent, largely in response to higher wheat prices. Petrol prices also increased in the December quarter 2002 (up 1.8 per cent), reflecting recent increases in world oil prices.
Despite these price rises, inflation overall fell to 3.0 per cent through the year to the December quarter 2002, down from 3.2 per cent in the previous quarter. This outcome is consistent with the Government's forecasts that inflation will fall to 2½ per cent over 2002-03 and remains within the medium term inflation target. Moderate wage outcomes and ongoing productivity improvements will continue to assist with this positive outlook.
Australia's economy has continued to grow strongly without generating significant inflationary pressures, helping to confirm its position as one of the top-performing developed economies in the world.