Today’s Consumer Price Index (CPI) shows that inflation in Australia remains moderate.
The All Groups CPI increased by 0.9 per cent in the September quarter, to be 3.0 per cent higher through the year, largely reflecting the impact of rising world oil prices. A sharp increase in world oil prices led to a strong 11.6 per cent rise in automotive fuel prices in the September quarter, contributing around 0.4 of a percentage point to the overall increase in the CPI.
Excluding the impact of automotive fuel prices, the CPI increased by 0.5 per cent in the September quarter and 2.1 per cent through the year.
Housing costs also rose in the September quarter. Continuing high levels of construction activity in some capital cities contributed to a 1.2 per cent rise in house purchase prices, driven by increases in labour and material costs. Seasonal increases in utilities prices and property rates and charges also contributed to the overall increase in housing costs. Price increases were recorded for holiday travel and accommodation (up 2.8 per cent), alcohol and tobacco (up 1.0 per cent) and food (up 0.8 per cent).
Partly offsetting these price increases were falls in a range of items. In particular, health costs fell by 1.1 per cent in the September quarter. This reflected a 4.8 per cent fall in pharmaceutical prices due to the effect of the Pharmaceutical Benefits Scheme safety net. Hospital and medical services also fell, driven by an increase in bulk billing and the impact of the Medicare Plus Safety Net. Price falls were recorded for poultry (down 1.9 per cent), audio, visual and computing equipment (down 1.7 per cent), motor vehicle repair and servicing (down 0.8 per cent), and household supplies (down 0.3 per cent).
In the September quarter the ABS introduced the 15th series CPI, which more accurately reflects current household consumption patterns in Australia. The most notable change is the introduction of a financial services index into the CPI, which measures the cost of financial services, including bank charges and the costs of real estate and stock broking transactions.
The medium-term outlook is for underlying inflation to remain moderate. Price pressures in the construction industry should ease, given the recent slowing in housing activity. Labour costs and other business input costs are expected to remain contained.
The Australian economy continues to perform remarkably well, in the face of a sharp rise in world oil prices. This reflects a judicious mix of economic policies and a dynamic and flexible economy, which will assist in maintaining Australia’s impressive economic performance in the period ahead.