The All Groups Consumer Price Index (CPI) indicates that inflation in Australia remains in check. The CPI increased by 0.9 per cent in the March quarter 2002, to be 2.9 per cent higher through the year. This returns inflation to within the target band and is consistent with the Mid-Year Economic and Fiscal Outlook (MYEFO) forecast for inflation of 2¾ per cent in 2001-02.
Today's data confirm that Australia is currently enjoying a very favourable combination of strong economic growth and moderate inflation.
In the March quarter, price increases occurred across a number of items, with seasonal and one-off factors playing an important role. Price rises were recorded for pharmaceuticals (up around 11 per cent due to the annual resetting of the safety net in January), holiday travel and accommodation (up 4.7 per cent, driven by the effect of the Ansett and September 11 insurance levies and domestic seasonal factors), education (up 4.7 per cent with the start of the new school year), insurance services (up 2.6 per cent with moderate rises in key components) and meat and seafood (up 1.8 per cent with overseas demand continuing to remain strong).
Petrol prices declined slightly by 0.1 per cent in the March quarter, following the decline of 12.2 per cent in the year to the December quarter 2001. However, recent rises in crude oil prices on world markets, mainly due to the conflict in the Middle-East, have resulted in a sizeable increase in petrol prices which, if sustained, will have a significant impact on the June quarter CPI.
Australian households benefited from solid price declines across a range of goods in the March quarter. The price of fruit and vegetables declined by 1.6 per cent, household appliance and utensil prices declined by 1.8 per cent, furniture prices declined by 1.4 per cent, audio visual and computing equipment prices declined by 1.2 per cent, and clothing and footwear prices declined by 0.4 per cent, with falls observed in many of the clothing and footwear component items.
The Producer Price Index data released earlier this week also indicated subdued upstream price pressures. The broadest measure of producer prices, the final commodities index, increased by 0.2 per cent in the March quarter and by 2.0 per cent in the year to March quarter.
Australia's economy has been able to grow strongly despite the recent global weakness without generating significant inflationary pressures, helping to confirm its current position as one of the world's top-performing developed economies.