NO.053

The release of the Consumer Price Index (CPI) today shows that inflationary

pressures in Australia remain in check. The All Groups CPI increased by 0.8 per cent

in the June quarter 2001, well below the increase of 1.1 per cent

in the March quarter.

The increase in the CPI through the year to the June quarter 2001 of 6.0 per cent

(in line with the Budget forecast) includes the one-off impact from the introduction

of The New Tax System (which is estimated to have added around 2 per cent

to the CPI over that period), along with the impact of generally higher world

oil prices on domestic petrol prices and the effect of seasonal influences on

fruit and vegetable prices. Looking through these factors, inflation over the

past year remained well within the 2-3 per cent target band.

Price increases for some meat and seafood items in the June quarter largely

reflects very strong world demand for Australian produce, partly attributable

to international concerns over foot and mouth disease in other parts of the

world.

Petrol prices in the June quarter also rose modestly, by 3.2 per cent,

following a large decline in the March quarter. However, significant falls in

petrol prices in the month of June which continued into July will be reflected

in the CPI outcome for the September quarter if they are sustained.

Households benefited from price falls for a range of items in the June quarter.

Fresh fruit and vegetable prices declined as supply conditions returned to more

normal levels following adverse seasonal conditions in northern NSW and southern

Queensland. Prices also fell for audio, visual and computing equipment, as well

as domestic holidays and travel. A decline in house purchase prices in the quarter

partly reflects the beneficial impact of the enhancement of the Governments

First Home Owners Scheme.

The continued low inflation environment and modest wage pressures will play

an important role in keeping interest rates low. In conjunction with recent

developments such as the enhancement of the First Home Owners Scheme, the abolition

of Financial Institutions Duty and stamp duty on marketable securities, and

the bring forward of the input tax credit scheme for motor vehicles, the Government

is helping to create an environment that is conducive to solid economic and

employment growth and the continued improvement of living standards for all

Australians.

Canberra

25 July 2001