Today's inflation figures showed that both CPI inflation and underlying inflation in the Australian economy continued to moderate in the December quarter, with underlying inflation easing to its lowest level in a decade.
The Consumer Price Index (CPI) grew by 0.4 per cent in the December quarter, down from 0.7 per cent in the previous three months. Headline inflation was 2.7 per cent through the year, down from 2.8 per cent in the September quarter.
Underlying inflation also softened to 0.4 per cent in the quarter, down from 0.5 per cent in the September quarter, and in through-the-year terms moderated to 2.2 per cent from 2.4 per cent.
The main contributors to headline inflation in the quarter were food, housing, and alcohol and tobacco prices. Growth in other CPI components was subdued with health, clothing and footwear, and transport prices declining in the quarter.
Flooding in Queensland and Victoria wasn't reflected in the December results, but will likely contribute to inflation in coming quarters, particularly through higher fruit and vegetable prices.
Although the inflationary impact of the floods will be temporary, we understand that this will put further pressures on household budgets.
It will take a long time to recover from these floods, but we mustn't forget the fundamentals of our economy remain strong.
We have resilient people, a huge pipeline of private investment, solid public finances and job creation that are the envy of the developed world.
The Government will continue the important task of building the economy's capacity so we can have sustainable growth with low inflation into the future.
25 January 2011