With the drought continuing to have an impact on Australians’ back pocket, the CPI rose by 0.7 of a percentage point in the December 2019 quarter, according to the Australian Bureau of Statistics.
The official figures are in line with forecasts, further denting chances of a rate cut in February following stronger growth numbers in December.
The CPI rose by 1.8 per cent through the year to the December 2019 quarter, following a year’s rise of 1.7 per cent to the September 2019 quarter.
The most significant price rises in the December 2019 quarter were for tobacco (+8.4 per cent); domestic holidays, travel and accommodation (+7.3 per cent); automotive fuel (+4.4 per cent); and fruit (+6.8 per cent).
The most significant price falls this quarter were for international holidays, travel and accommodation (-2.9 per cent) and women’s garments (-2.5 per cent).
ABS chief economist Bruce Hockman said: “Drought conditions are impacting prices for a range of food products. Food prices increased [by] 1.3 per cent this quarter, with price rises for beef and veal (+2.9 per cent), pork (+4.7 per cent), milk (+1.7 per cent) and cheese (+2.4 per cent). Both the impact from the drought and lower seasonal supply contributed to price rises for fruit (+6.8 per cent) this quarter.”
However, Mr Hockman noted annual inflation remains subdued partly due to the fall in housing-related expenses.
“Through the year to the December 2019 quarter, price falls were recorded for utilities (-1.0 per cent) and new dwelling purchase by owner-occupiers (-0.1 per cent), while rent price rises remained modest (+0.2 per cent),” Mr Hockman said.
AMP’s senior economist, Diana Mousina, has warned that low inflation could remain an issue throughout 2020.
“The persistence of the low inflation environment is likely to remain an issue in 2020. Stronger economic growth and higher inflation expectations are required to lift inflation,” Ms Mousina said.
“Other well-known forces like technological improvements, globalisation and competition resulting in easy transportation of goods are keeping down the prices for goods.”
nestegg has previously reported that the central bank is set to hold off February’s rate cut following a stronger-than-expected bounce in the labour market.
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