NO.004

CONSUMER PRICE INDEX – DECEMBER QUARTER 1998

The December quarter CPI outcome is another positive for the Australian economy and continues the impressive inflation performance since the Government came to office.

The All groups CPI rose by 0.5 per cent in the December quarter 1998 and 1.6 per cent through the year to the December quarter.

Low inflation has been a key factor behind the recent exceptional performance of the Australian economy. Since this Government came to office the average headline inflation rate has been 0.9 per cent per annum, down markedly from a rate of 5.2 per cent under Labor. Australia is now firmly entrenched among the ranks of the low inflation countries in the OECD.

Transportation costs fell by 0.3 per cent in the December quarter, reflecting falls in both motor vehicle prices and petrol prices. This is the first time since the December quarter 1976 that there have been five consecutive quarterly falls in overall transportation costs.

Contributing to the low December quarter result were lower health and personal care costs, which fell by 0.4 per cent in the quarter, reflecting a fall in the net cost of pharmaceuticals flowing from the Pharmaceutical Benefits Schemes safety net. The Governments 30 per cent rebate on private health insurance, which was introduced from 1 January 1999, is expected to impact favourably on the CPI in the March quarter 1999.

Food prices rose by 1.0 per cent in the December quarter, as fresh fruit and vegetables prices rose in response to unfavourable seasonal conditions. The price of meat and seafood rose by a modest 0.1 per cent in the quarter, while the price of cereal products fell by 0.6 per cent.

Prices of imported goods as a group fell by 0.7 per cent in the quarter and 1.3 per cent through the year to the December quarter. This fall in retail prices of imported goods illustrates the continuing competitive pressures in the Australian economy, with the price of imported consumption goods across the docks increasing by around 7 per cent through the year to the December quarter, in response to the lower exchange rate.

The underlying inflation rate was 0.3 per cent in the December quarter 1998 and 1.6 per cent through the year to the December quarter.

CANBERRA

28 January 1999