Peter Costello

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Consumer Price Index March Quarter 2007

NO.030

Consumer Price Index March Quarter 2007

Today’s All Groups Consumer Price Index (CPI) rose by 0.1 per cent in the March quarter 2007, to be 2.4 per cent higher than a year ago.  Excluding volatile items (fruit, fuel and vegetables) the CPI rose by 0.6 per cent to be 2.5 per cent higher through the year, indicating a moderation in underlying inflationary pressures.

The food component of the CPI fell by 2.3 per cent in the March quarter and subtracted 0.4 of a percentage point from quarterly inflation. This was largely driven by a 33.8 per cent fall in fruit prices, which reflected a 73 per cent fall in the average price of bananas.  Banana prices are now around their levels prior to Cyclone Larry.

Price falls were recorded across a range of other items in the March quarter including furniture and furnishings (down 2.8 per cent), holiday travel and accommodation (down 1.7 per cent), and clothing and footwear (down 0.4 per cent).  Audio, visual and computing equipment prices fell by 2.4 per cent in the March quarter to be 8.9 per cent lower than a year ago, reflecting the continuing benefits of cheaper import prices and ongoing quality improvements.  Financial services prices also fell (down 0.2 per cent), due to increased competition in the lending market.

Housing costs rose by 1.0 per cent in the March quarter, in line with seasonal increases in utilities prices, and strong growth in rents (up by 1.4 per cent). House purchase prices rose by 1.0 per cent, reflecting strong growth in those States associated with strong mining industries such as Queensland, the Northern Territory and Western Australia.  Fuel prices rose by 1.4 per cent in the quarter, but were 2.3 per cent lower than a year ago.

Health and education prices contributed to inflation in the March quarter.  Price rises in health were mainly due to rises in pharmaceutical prices (up 12.8 percent), reflecting the annual resetting of the Pharmaceutical Benefit Scheme (PBS) safety net threshold.  Education prices were up by 5.0 percent, reflecting the annual fee increases which occur at the commencement of the new education year.

The recent moderation in producer prices and an easing in underlying inflationary pressures should see the CPI grow at a moderate rate in the period ahead. However, high world oil prices and the effects of drought on food prices continue to create some uncertainty around the inflation outlook.

The Government’s sound economic management has ensured that the Australian economy is well‑positioned to withstand substantial price fluctuations. After significant increases in fuel and fruit prices, inflation is now back at the middle of the medium-term inflation target band, while the economy continues to grow solidly. Australian households are benefiting from the higher standard of living that comes with low inflation, solid and sustainable wage growth, near record labour force participation and the lowest unemployment rate in over 30 years.

CANBERRA
24 April 2007

Contact :
David Gazard - 02 6277 7340

 

24 Apr 2007

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