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 September quarter 2002.
Headline inflation through the year was 3.2 per cent as the abnormally low September 2001 quarter dropped out. The September 2002 outcome is consistent with the Budget forecasts that inflation will fall to 2½ per cent (tty) over 2002-03, within the Reserve Bank's medium term inflation target of 2 to 3 per cent on average over the cycle.
In the September quarter, price increases were recorded for housing (up 1.3 per cent, driven by increased building costs, utilities prices and property rates and charges), fruit and vegetables (up 4.2 per cent, with vegetable prices increasing significantly due to drought), and holiday travel and accommodation (up 1.8 per cent, reflecting higher overseas holiday travel and accommodation prices).
Australian households benefited from price declines across a range of items in the September quarter. For example, the prices of clothing and footwear (down 0.6 per cent), meat and seafood (down 1.3 per cent), petrol (down 1.2 per cent) and motor vehicles (down 0.9 per cent) declined.
The September quarter CPI is consistent with other data that point to subdued prices pressures. Wages growth is moderate, other cost increases are generally muted and with ongoing productivity gains there are few pressures on business margins. Further, the Producer Price Index data released earlier this week show that there are limited upstream price pressures. The broadest measure of producer prices, the final commodities index, increased by 0.5 per cent in the September quarter and by 1.4 per cent through the year to the September quarter.
Today's data provide further evidence that Australia remains one of the world's strongest economies in a very difficult international environment. The Australian economy continues to enjoy solid growth and moderate inflation.