Subdued Consumer Price Index rise in September quarter

Subdued Consumer Price Index rise in September quarter
Subdued Consumer Price Index rise in September quarter

The Consumer Price Index (CPI) rose 0.4 per cent in the September quarter 2018, according to the latest ABS figures.

This follows a rise of 0.4 per cent in the June quarter 2018.

The CPI rose 1.9 per cent through the year to September quarter 2018, having increased 2.1 per cent through the year to the June quarter 2018.

Bruce Hockman, chief economist for the ABS, said annual growth in the CPI fell back below 2 per cent in the September quarter 2018.

"Modest rises in housing costs, including rents, utilities and property rates, and a fall in child care out-of-pocket expenses, saw a subdued rise in the CPI this quarter.”

AMP Capital chief economist Shane Oliver said the September quarter inflation data confirms that underlying pricing pressures in the Australian economy are still weak.

"Spare capacity remains high, wages growth remains weak and competition and technological innovation in numerous industries (retail, communications and services) remains intense," Oliver said.

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Alternate text: The CPI All Groups rose 0.4 per cent in the September quarter 2018. The most significant positive contributors are Recreation and culture +1.6 per cent; Alcohol and tobacco group +1.3 per cent; Housing group +0.4 per cent; and Transport gr 

The most significant rises this quarter are international holiday travel and accommodation, which grew 4.3 percent, fruit (+2.4 percent) and property rates and changes (+2.3 percent). 

There were big falls in childcare, which fell nearly 12 percent following the introduction of the Child Care Subsidy on 2 July, which replaced the Child Care Rebate and Child Care Benefit.

Telecommunications equipment and services declined 1.5 percent.

Oliver said pricing power remains very weak with inflation at the bottom of the range.

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Subdued Consumer Price Index rise in September quarter

"The September quarter inflation data confirms yet again that pricing power remains very weak and inflation is continuing to run around or just below the RBA’s 2-3% target band.

"There are no signs of any near-term significant price pressures in Australia, particularly with subdued wages growth and competition and technological innovation remaining intense.

Oliver said AMP's view is that the RBA won't raise interest rates until late 2020 at the earliest given the weakness in inflation, wages and the Sydney and Melbourne housing markets.

He said that with the uncertain outlook for consumer spending, the next move being a rate cut cannot be ruled out.

Joel Robinson

Joel Robinson

Joel Robinson is a property journalist based in Sydney. Joel has been writing about the residential real estate market for the last five years, specializing in market trends and the economics and finance behind buying and selling real estate.

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