NO.061

CONSUMER PRICE INDEX – JUNE QUARTER 2004

Today’s Consumer Price Index (CPI) is a solid result. It shows that

inflation was moderate during a sustained period of strong economic growth with

unemployment at record lows.

The All Groups CPI increased by 0.5 per cent in the June quarter 2004. Inflation

in the year to the June quarter 2004 was 2.5 per cent, in the middle of the

inflation target band.

Increased world oil prices and the recent depreciation of the exchange rate

saw petrol prices rise by 5.8 per cent in the June quarter. Excluding the impact

of petrol prices, the CPI increased by 0.3 per cent in the June quarter, and

by 2.1 per cent over the past year.

House purchase prices rose by 1.4 per cent in the June quarter, reflecting

high levels of demand in the construction industry. The 5.1 per cent increase

in the price of hospital and medical services reflected an increase in private

health insurance premiums, partly offset by the impact of the Medicare Plus

Safety Net.

Food prices fell by 0.9 per cent in the June quarter, to some extent unwinding

the drought-related increases of recent years. Bread prices fell by 0.5 per

cent in the June quarter and by 4.5 per cent over the past year, following the

record wheat crop in 2003. Improved growing conditions for a number of vegetable

crops led to an 11.4 per cent fall in the price of vegetables, while fruit prices

fell by 3.2 per cent in the quarter, driven by the increased availability of

seasonal products.

Increasing competition led to price falls in a number of sectors. Audio, visual

and computing equipment prices fell by 5.2 per cent in the June quarter, reflecting

ongoing quality improvements and discounting on a number of home entertainment

items. The price of domestic holiday travel and accommodation fell by 1.7 per

cent, consistent with the usual seasonal pattern and increased competition in

the domestic airline industry.

June quarter results support forecasts that inflation will remain within the

inflation target band in the coming year. Despite the unemployment rate falling

to 23-year lows, wage pressures remain contained. Housing sector leading indicators

are showing signs of a slow-down, suggesting that price pressures in the construction

industry should moderate over the medium term.

Australia’s continued moderate inflation outcomes are evidence of the

success of labour and product market reforms. These reforms have created an

environment that promotes solid economic and employment growth, and continuing

improvement of living standards in Australia.

CANBERRA

28 July 2004

Contact: David Alexander

(02) 6277 7340