June quarter ABS figures show subdued inflation

The latest ABS figures shows the Consumer Price Index rose 0.2 percent in the June quarter.

This follows a rise of 0.5 percent in the March quarter of 2017.

The most significant price rises for the quarter were medical and hospital services (+4.1 per cent), new dwelling purchase by owner-occupiers (+0.9 per cent) and tobacco (+1.0 per cent).

These rises are partially offset by falls in domestic holiday travel and accommodation (-3.2 per cent) and automotive fuel (-2.5 per cent).

The CPI rose 1.9 per cent through the year to June quarter 2017 having increased to 2.1 per cent in the March quarter 2017.

Bruce Hockman, chief economist for the ABS said that inflation in Australia remains low.

"Price falls for automotive fuel; and ongoing competition in the clothing and food retail markets has contributed to this quarter’s result.

"In addition, the ABS continues to closely monitor the impact of Cyclone Debbie on fruit and vegetable prices.

"While strong price rises were recorded for select fruit and vegetables such as tomatoes, beans, cucumbers, melons, berries and bananas in the June quarter 2017 - these rises were offset by falls in seasonally available fruits such as oranges, mandarins and apples."

CommSec's Craig James suggests the benign inflation will keep the rates on hold next week.

"There is no smoking gun to justify a change of interest rates in any direction," James said.

"Inflation is comfortable just below the Reserve Bank’s 2-3 per cent target band.

"Inflation isn’t rapidly moving below the target band, nor is it rapidly lifting back into the target band.

"So the Reserve Bank can stay on the interest rate sidelines.

REIA President Malcolm Gunning suggests the low CPI is good news for homebuyers and renters.

“The annual change for both the analytical series of trimmed mean and for the weighted median was 1.8 per cent with the annual change in the trimmed mean being the same for the past four quarters and the weighted mean up by 0.1 percentage points compared to the year to the March 2017," he said.

"This is below the RBA’s target zone of 2-3 per cet and suggests the continuation of historically low interest rates for some time yet."

“The latest CPI figures show that the increased investment in housing through the current taxation arrangements has kept growth in rents lower than they have been historically.

“In Sydney and Melbourne where much of the investor activity has been focussed the increase in rents in the past twelve months has been 2.5 per cent and 1.7 per cent respectively.

“With the CPI figures always a central component of the RBA’s consideration, the latest inflation data would suggest that home buyers can be comfortable in the knowledge that interest rates will remain stable for a while yet."

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