There’s an upside to being a banana republic, it seems. Prices for the flexible fruit fell 73% in the March quarter, helping the nation record its lowest annual inflation rate for two years.

The Consumer Price Index rose just 0.1%, leaving the annual increase in the cost of living at 2.4% and a number of economists open-mouthed, but putting a smile on the dial of Treasurer Peter Costello.

The low inflation result makes it extremely unlikely that the Board of the Reserve Bank will act to raise interest rates when it meets next week.

And Peter Costello is hoping that there is even better news to come. At a presser today, the Treasurer predicted that inflation would be below two per cent next quarter. He said inflation hit a peak in the middle of last year and appeared to have decelerated.

“The headline rate will go lower,” Cossie claimed. “You will see a headline rate next quarter below two per cent.”

Peter Fray

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Peter Fray
Editor-in-chief of Crikey