Today's Consumer Price Index (CPI) result shows that inflationary pressures continue to subside due to the global recession and the impacts it is having on the domestic economy.
The CPI rose by 0.5 per cent in the June quarter 2009 to be 1.5 per cent higher through the year, slowing from 2.5 per cent through the year to the March quarter. This is the lowest annual headline inflation outcome in 10 years, reflecting the ongoing impact of the global recession on our economy.
Underlying inflation continued to slow, falling from 1.1 per cent in the March quarter to 0.8 per cent in the June quarter. Underlying inflation fell from 4.2 per cent through the year to the March quarter to 3.9 per cent through the year to the June quarter.
The further easing in headline inflation reflected falls particularly in food prices which detracted 0.2 of a percentage point from quarterly headline inflation. This was driven by a 7.2 per cent fall in the price of fruits and vegetables. Prices of deposit and loan facilities also detracted 0.2 of a percentage point from headline inflation in the quarter.
On the other hand, resurgent international oil prices are feeding through to domestic pump prices, adding to headline inflation. Despite a considerable strengthening of the Australian dollar over the quarter, automotive fuel prices rose by 3.6 per cent in the quarter, but are still 20.6 per cent lower through the year as a result of previous price falls. This added 0.1 of a percentage point to June quarter headline inflation.
Housing prices contributed 0.2 of a percentage point to June quarter headline inflation, with price rises in rents, new house purchases, and house repairs and maintenance.
Health prices contributed 0.1 of a percentage point to June quarter headline inflation, driven by rising hospital and medical services prices stemming from an annual increase in private health insurance premiums.
Since late 2008, inflation has moderated significantly as the deepening global recession has lessened demand pressures. Annual headline inflation has decreased from 5.0 per cent in September quarter 2008 to 1.5 per cent currently. Inflation is expected to remain subdued over the near term as the effects of the global recession continue to impact on the domestic economy.