The recession we haven’t quite had continues to dominate the Australian economy. The CPI rose only 0.5% in the June quarter, up from the 0.1% rise in the March quarter, while the annual rate to June of 1.5% was sharply down on the 2.5% annual rate in the 12 months ending in March.
That was right on market forecasts and expected. It was the lowest annual inflation rate since late 1999 and the first time the rate has fallen under 2% annual since 2007.
But apart from those points, there was nothing extraordinary in the June quarter Consumer Price Index figure released this morning.
The Reserve Bank would not have been surprised with the fall in the headline rate, nor the persistence of core inflation, as shown by their own measures. They have been telling us that both were happening in the board minutes for the last three months, and did so again yesterday.
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And core inflation, as measured by the Reserve Bank’s twin preferred measures, the Weighted Median and the Trimmed Mean, again showed a small improvement, but left the core rate well above the central bank’s target range (over time) of 2% to 3%.
The RBA said the Weighted Men rose 0.8% in the quarter to 4.2% (compared with the 1.2% rise in the March quarter to 4.4%) and the Trimmed Mean rose 0.8% in the June quarter to 3.6% (1% in March to 3.9%). They remain the figures the central bank watch more closely than the headline grabbing CPI.
While lower oil and petrol prices and interest rates had a big impact on the annual rate, they had widely differing impacts on the June quarter: interest rates cut cost pressures; higher petrol prices were a big factor behind the higher rise, when compared to March. higher health costs were a big factor in the June quarter rise as well.
Food prices were a big positive for costs in the June quarter, and were in fact a major moderating factor.
The ABS said in its commentary in today’s release that the “most significant price rises this quarter were for automotive fuel (3.6%), hospital and medical services (3.6%), rents (1.4%), furniture (3.7%) and house purchase (0.8%). “The most significant offsetting price falls were for deposit and loan facilities (-4.3%), vegetables (-6.9%), fruit (-7.6%), and overseas holiday travel and accommodation (-3.4%).”