NO.069

CONSUMER PRICE INDEX JUNE QUARTER 2005

Today’s Consumer Price Index (CPI) confirms that Australia continues to enjoy stable low inflation. The All Groups CPI increased by 0.6 per cent in the June quarter 2005, to be 2.5 per cent higher through the year, in the middle of the medium-term inflation target band.

An increase in world oil prices saw automotive fuel prices rise by 7.2 per cent in the June quarter, after falling by 2.7 per cent in the previous quarter. The increase in automotive fuel prices contributed around 0.3 of a percentage point to the overall increase in the CPI in the June quarter. Excluding the impact of petrol prices, the CPI increased by 2.1 per cent through the year.

Prices fell across a range of items in the June quarter, including fruit (down 10.5 per cent), domestic holiday travel and accommodation (down 5.7 per cent), electricity (down 1.3 per cent), and audio, visual and computing media (down 0.8 per cent). Competitive pricing by car dealers and bonus offers saw prices for motor vehicles fall by 1.1 per cent in the June quarter.

House purchase prices rose by 0.9 per cent in the June quarter, reflecting the continuing strong demand for labour and materials in the construction sector in some capital cities. However, this quarter’s growth in house purchase prices is the lowest quarterly increase since the December quarter 2002, consistent with the recent moderation in the housing market.

The price of health rose by 2.4 per cent in the June quarter, reflecting increases in private health insurance premiums, partly offset by the impacts of both the Medicare Plus safety net (on out-of-hospital medical expenses) and the Pharmaceutical Benefits Scheme safety net (on pharmaceutical expenses). The increase in the CPI in the June quarter also reflects price increases for household furnishings, supplies and services (up 1.3 per cent), clothing and footwear (up 0.8 per cent), child care (up 1.4 per cent) and insurance services (up 1.1 per cent).

The medium-term outlook is for inflation to remain moderate. Well-anchored inflation expectations have helped to contain the impact of high oil prices, and price pressures in the construction industry should continue to ease. While the unemployment rate has fallen to a 30-year low, aggregate wage growth has remained moderate.

Today’s CPI release, along with continuing strength in employment and income growth, confirms that the Government’s macroeconomic policies are delivering ongoing improvements in Australian living standards.

MELBOURNE

27 July 2005

Contact: David Alexander

03 9650 0244