Peter Costello

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Consumer Price Index - September Quarter 2004



Today’s Consumer Price Index (CPI) confirms that inflation remains low, with the All Groups CPI increasing by 0.4 per cent in the September quarter 2004. Inflation in the year to the September quarter was 2.3 per cent, well within the medium-term inflation target band.

Higher world oil prices in the September quarter led to a 3.3 per cent rise in domestic petrol prices, adding 0.1 of a percentage point to the overall increase in the CPI. Excluding the impact of petrol prices, the CPI increased by 0.3 per cent in the September quarter, and by 1.9 per cent over the past year.

The increase in the CPI also reflects housing, overseas holiday travel and accommodation, and seasonal price increases (such as property rates and charges). The continuing high level of construction activity saw house purchase prices increase by 1.1 per cent in the September quarter, underpinned by increases in labour and material costs.

Australian households benefited from price declines across a range of items in the September quarter. In particular, food prices fell 0.6 per cent in the September quarter, due to plentiful supplies of fruit and vegetables. Following large falls in the June quarter, fruit prices declined a further 2.2 per cent in the September quarter, and vegetable prices fell 7.7 per cent. Other price falls include motor vehicles (down 1.8 per cent); audio, visual and computing equipment (down 2.5 per cent); and pharmaceuticals (down 4.4 per cent).

Hospital and medical services rose by 0.1 per cent the quarter, the smallest quarterly increase in this index since the March quarter 1999. A slight increase in general medical fees was largely offset by a small increase in bulk billing ratios and the impact of the Medicare Plus safety net on out of hospital medical expenses.

The key medium-term influences on inflation point to continuing modest outcomes, with inflation expected to remain within the medium-term target band. Labour and other business input costs are expected to remain contained. In addition, leading indicators for the housing sector are showing an easing in activity, suggesting that price pressures in the construction industry should moderate.

Once again this outcome confirms that the Government’s macroeconomic policies are delivering an environment conducive to moderate inflation and strong economic growth.

27 October 2004

Contact: David Alexander
(03) 9650 0244

27 Oct 2004

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