The June quarter CPI outcome is another excellent result and continues the exceptionally good inflation performance of the past two years.

The underlying rate of inflation was 0.4 per cent in the June quarter 1998 and 1.6 per cent through the year to the June quarter. The through-the-year outcome is only slightly above the record low of 1.4 per cent recorded in the year to the December quarter 1997. The underlying rate of inflation has now been below 2 per cent in through the year terms for the last eight quarters.

The All groups CPI rose by 0.6 per cent in the June quarter 1998, after rising by 0.3 per cent in the previous quarter. Through the year to the June quarter 1998, the All Groups CPI rose by just 0.7 per cent.

The major contribution to the low June quarter result came from lower motor vehicle prices, which fell by 2.1 per cent in the quarter. This is the first time since the December quarter 1976 that there have been three successive quarterly falls in overall transportation costs.

Prices of imported items as a group fell by 0.1 per cent in the quarter. This small fall in retail prices of imported goods contrasts with significant increases in the price of imported goods at the dock in response to the lower exchange rate. The retail price of imported items has been relatively steady for the last three years and demonstrates the extent of ongoing competitive pressures in the Australian economy.

Low inflation is a key to ensuring that the economy can grow strongly on a sustainable basis and, over the past year, continued competitive pressures have helped maintain the general improvement in underlying inflation. These results show that Australia is firmly entrenched among the ranks of the worlds low inflation economies.

CANBERRA

22 July 1998