TREASURER:
Today's Consumer Price Index for the March quarter indicated that inflation was running at a level of 2.9 per cent during the year which is a very positive outcome. It shows that the rate of inflation has fallen from 3.1 to 2.9 per cent, that it is back within the band which the Government has set with the Reserve Bank of 2 to 3 per cent, and notwithstanding a very strongly growing economy that inflation is subdued. The principal rises, as you would expect, were in the area of holiday travel and insurance coming off the back of the Ansett collapse, the ticket levy, September the 11th, the effect that that has had in relation to insurance. But there were actually some declines in relation to fruit and vegetables, furniture prices, household appliances, clothing and footwear. The Producer Price Index data which was released earlier this week, which measures producer prices, was also very subdued, moving at 0.2 per cent for the quarter and 2 per cent for the year, so that shows that there are no great price pressures in the upstream area, the producer price area, either. And that is indicative of good inflation outcomes, that is low inflation outcomes over future quarters. An economy which is now growing strongly on low inflation is a good opportunity for job creation, and considering that we have come through such a significant international down-turn the Australian economy has shown remarkable resilience, one of the fastest, if not the fastest, growing economy in the industrialised world growing now on low inflation.
JOURNALIST:
(inaudible) next month in line with the consensus that it would add to the case for (inaudible)…?
TREASURER:
Well, the, today's CPI actually shows that the annual rate of consumer price increases is declining. That is, it came down from an annual rate of, an annualised rate of, through the year rate of 3.1 per cent to 2.9 per cent, so it actually declined. And as I said earlier, the Producer Price Index which was released earlier this year, which is producer prices, it is more upstream and therefore more of a leading indicator, was also very subdued. And that would bode well, I would think, for future quarters.
JOURNALIST:
(inaudible)
TREASURER:
I think yes, the Producer Price Index being as low as it was, and that is more upstream, indicates that you would have subdued inflation in future quarters which I think is good news for consumers.
JOURNALIST:
How does this impact on interest rate rises?
TREASURER:
Well, I think that if you looked at these figures you would see a picture of the economy which is growing strongly, but is growing with low inflation. And, in fact, inflation is now back within the 2 to 3 per cent band.
JOURNALIST:
Are interest rises likely?
TREASURER:
Look, I never talk about future movements in interest rates, as you know. But we are looking here at the inflation data. The inflation data shows that the annual through the year rate of inflation is coming down. It is now back within the band of 2 to 3 per cent and we are doing that on an economy which is growing faster than practically every other developed nation in the world, so, that is good news.
JOURNALIST:
(inaudible) just on something else. There is a little bit of confusion out there about when the Home Owners' Grant is going to expire, or if it's going to expire. Is it due to end on June 30th?
TREASURER:
The, there are two components, there is the First Home Owners' Scheme of $7000 and then the Government announced, in addition to that, an additional $7000 grant for the construction of new homes. The additional grant was wound down, the additional $7000 was wound down to, was wound down from 1 January and will disappear on 30th of June leaving the continuation of the original scheme which is a $7000 grant in place.
The original scheme, the original $7000 will continue. The additional $7000 was time limited and on top of that and will be phased out from the 30th of June.
JOURNALIST:
Was that originally expected to end on the 30th of June?
TREASURER:
No. Nor is it being time limited.
JOURNALIST:
(inaudible) comments to make in relation to the ACCC investigating possible collusion and price fixing among the major oil companies?
TREASURER:
We would expect that if credible evidence is given to the Competition Commission of any breach of the Act - price collusion, or any other breach of the Act - that it would investigate it and it would investigate it very thoroughly. It has extensive powers to enter premises and to seize documents. It has exercised those powers, it has an obligation to investigate, and, if there is evidence, to bring proceedings in a court of law, in a proper place. But it is too early to say what the nature of the evidence is, it is obviously still being investigated. But if there is credible evidence of a breach of the Act then it has the obligation to investigate and I would expect it to do so, and that in fact is what it is doing. I have spoken to the Chairman of the Commission this morning who has given me an outline of the matters that he is investigating. Nobody should jump to any conclusions. The reason you have an investigation is to try and see what evidence there is and if there is sufficient evidence you bring a charge in the proper place and you bring it before the courts. But it is too early in the day to say whether or not that will occur.
JOURNALIST:
Did he give you any indication whether or not there has been sufficient evidence so far?
TREASURER:
They believe that there is credible evidence requiring an investigation. They will now conduct the investigation. If that leads to evidence of a breach of the Act then proceedings will be laid. But we are not at that stage. All they are doing at the moment is an investigation, as you would expect them to do.
JOURNALIST:
Mr Costello, can I get you to repeat your earlier comments for those of us who sadly came late, in relation to inflation and the impact on the economy?
TREASURER:
I'd better make sure I say the same words as I did earlier.
Today's Consumer Price Index showed an increase of 0.9 per cent for the March quarter and for inflation to be 2.9 per cent higher than it was a year ago.
This actually shows that the rate of inflation has declined from an annual rate of 3.1 per cent to 2.9 per cent and the rate of inflation is squarely within the target range that the Government has set with the Reserve Bank of 2 to 3 per cent. The good news is that we have a strongly growing economy, an economy which is growing really as fast, or faster, than all the other developed economies of the world, and we are growing strongly with a low inflation rate. Now that is good for consumers because prices are not moving strongly against them. But the strong growing economy is also good for jobs creation and we have seen that over the last 3 months. So we have the picture of an Australian economy which is high growth, low inflation, and that is the kind of picture that we would like to continue.
JOURNALIST:
What sort of pressure otherwise does that put on interest rates, on the movement of interest rates?
TREASURER:
Well, I think the Consumer Price Index, the measure of consumer prices is within the range and has actually declined, that is the good news. Other measures of inflation, the Producer Price Index, which measures prices further back in the chain, at the producer level, are actually very subdued too. So, that bodes well for continuing low inflation over (inaudible) quarters.
JOURNALIST:
There has been speculation though that interest rates are on the way up. Do you think that this will augur against that?
TREASURER:
People will always speculate but the one person who can't speculate is me, and I haven't and I won't. But the news of today is that the Consumer Price Index shows moderate inflation in a high growth economy.
Thank you all very much.