Today's inflation figures showing a moderation in both headline and underlying inflation are encouraging, but also show many households continue to face cost of living pressures.
The Consumer Price Index (CPI) rose by 0.6 per cent in the September quarter 2011, down from 0.9 per cent in the previous quarter. Headline inflation was 3.5 per cent through the year, down from 3.6 per cent in the June quarter. In seasonally adjusted terms, the CPI rose by 0.4 per cent in the quarter.
Underlying inflation moderated to 0.3 per cent, down from 0.8 per cent in the June quarter. This is the lowest quarterly rate of underlying inflation in well over a decade. In through-the-year terms, underlying inflation in the September quarter fell to 2.5 per cent.
The moderation in headline inflation in the quarter was driven by falls in health prices (down 1.0 per cent) reflecting seasonal declines in the price of pharmaceuticals, a fall in fruit and vegetables prices (down 1.8 per cent) and falls in fuel prices (down 1.4 per cent) reflecting easing world oil prices in the September quarter.
Offsetting these price falls were increases in housing costs, accompanied by rises in recreation and culture, and clothing and footwear prices. Housing costs rose 1.9 per cent, contributing around 0.4 percentage points to headline CPI, reflecting higher utilities prices and property rates and charges, as well as a rise in rents. Recreation and culture prices also rose by 0.9 per cent, contributing 0.1 percentage points to headline CPI, reflecting a strong seasonal rise in the price of international travel. Clothing and footwearprices rose 1.5 per cent, also contributing around 0.1 percentage points to headline CPI.
The September quarter 2011 CPI introduces the 16th series of the CPI. The 16th series review of CPI was the first review since 2005. The September quarter release updates the household expenditure pattern and includes other major changes such as a new methodology for seasonal adjustment and the removal of the indirect component of the deposits and loans sub-index.
Today's inflation outcomes shine another light on the strong economic fundamentals which set us apart from the rest of the developed world. We have a growing economy, low unemployment, moderating inflation, very low public debt and a huge pipeline of business investment gearing up. On top of these strong fundamentals, the Government is getting on with the job of rolling out the tough reforms that will further strengthen our economy for the future.