NO.071

The September quarter 1999 CPI outcome shows that inflation in Australia remains in

check in an environment of continuing strong economic growth.

The All Groups CPI rose 0.9 per cent in the September quarter 1999 and

1.7 per cent in the year to the September quarter. The main influence on the CPI

in the September quarter was the doubling in world oil prices earlier this year. Removing

the direct effect of higher petrol prices on the CPI, inflation remained low at

0.5 per cent in the September quarter and just 1.4 per cent through

the year to the September quarter. Higher petrol prices added 0.4 percentage points to the

increase in the September quarter, following a 0.2 percentage point contribution in the

June quarter.

Higher world oil prices were the major factor behind the 14.5 per cent

increase in petrol prices in the June and September quarters. However, world oil prices

have stabilised or declined slightly over recent weeks.

Reflecting the sustained strength of activity in the housing sector, prices of newly

constructed houses increased by 2.0 per cent in the September quarter and

5.5 per cent over the year to the September quarter.

Fresh vegetable prices fell by 6.1 per cent in the September quarter. This

reflected a return to more normal seasonal conditions which has allowed fresh vegetable

prices to fall by nearly 16.0 per cent since the start of the year, largely

reversing the sharp increases in vegetable prices that occurred in 1998.

As previously announced, publication of the Treasury underlying inflation rate was

discontinued this quarter. The Reserve Bank’s medium term target for monetary policy was

restated in terms of the headline CPI in October 1998. This is because the 13^th

series CPI (introduced a year ago) is less affected by mortgage and consumer interest

rates than the 12^th series CPI.

Low inflation has been a key factor behind the exceptional performance of the

Australian economy since this Government came to office. This quarter’s result confirms

that ongoing inflation remains low as a result of moderate wages growth, continuing strong

productivity growth and healthy competition. The foundations for continued strong economic

growth with low inflation remain in place as we head into the new century.

CANBERRA

27 October 1999