Today’s All Groups Consumer Price Index (CPI) increased 1.6 per cent in the June quarter 2006 to be 4.0 per cent higher through the year. Inflation in the June quarter was largely driven by a significant increase in fuel prices and the extreme impact of Tropical Cyclone Larry on banana prices. Fuel and fruit accounted for around 60 per cent of quarterly inflation. Excluding price increases in fuel and fruit, the CPI rose by 0.6percent in the June quarter to be 2.6percent higher through the year.
Automotive fuel prices rose by 11.2per cent in the June quarter to contribute around 0.5ofapercentage point to quarterly inflation. Fruit prices rose by a record 52percent in the June quarter, primarily due to a 250percent increase in banana prices, and contributed around 0.5of a percentage point to the quarterly increase in the CPI. The banana price increase should be reversed in the period ahead, as production returns to more normal levels. Price rises were also recorded for a number of other food items, with increased distribution and packaging costs cited as a contributing factor.
Australian households benefited from price falls across a range of items in the June quarter, including domestic holiday travel and accommodation (down 0.9percent); audio, visual and computing equipment (down 1.2percent); motor vehicles (down 1.0percent) and utilities (down 0.6percent).
Health costs rose by 2.4percent in the June quarter, reflecting the annual increase in private health insurance premiums, partly offset by the effects of both the Medicare Plus safety net and the Pharmaceutical Benefits Scheme safety net. Other price increases included financial services (up 1.2percent), and clothing and footwear (up 0.8percent) following the ending of seasonal sales.
House purchase prices also contributed to inflation, growing by 1.1percent in the June quarter. Western Australia continues to experience much stronger growth in house purchase prices than other states, with Perth house purchase prices increasing by 15.5percent through the year, compared to the national average of 3.6percent.
The Australian economy is adjusting well to high fuel prices and to temporary shocks such as Tropical Cyclone Larry. The unemployment rate remains at 30-year lows, the economy is growing solidly, wage growth remains steady and productivity is strengthening. Looking forward, the medium-term influences on inflation point to more moderate outcomes with the temporary factors affecting inflation likely to abate.