NO.095

CONSUMER PRICE INDEX – SEPTEMBER QUARTER 2004

Today’s Consumer Price Index (CPI) confirms that inflation remains

low, with the All Groups CPI increasing by 0.4 per cent in the September

quarter 2004. Inflation in the year to the September quarter was 2.3 per

cent, well within the medium-term inflation target band.

Higher world oil prices in the September quarter led to a 3.3 per cent

rise in domestic petrol prices, adding 0.1 of a percentage point to the

overall increase in the CPI. Excluding the impact of petrol prices, the

CPI increased by 0.3 per cent in the September quarter, and by 1.9 per cent

over the past year.

The increase in the CPI also reflects housing, overseas holiday travel

and accommodation, and seasonal price increases (such as property rates

and charges). The continuing high level of construction activity saw house

purchase prices increase by 1.1 per cent in the September quarter, underpinned

by increases in labour and material costs.

Australian households benefited from price declines across a range of items

in the September quarter. In particular, food prices fell 0.6 per cent in

the September quarter, due to plentiful supplies of fruit and vegetables.

Following large falls in the June quarter, fruit prices declined a further

2.2 per cent in the September quarter, and vegetable prices fell 7.7 per

cent. Other price falls include motor vehicles (down 1.8 per cent); audio,

visual and computing equipment (down 2.5 per cent); and pharmaceuticals

(down 4.4 per cent).

Hospital and medical services rose by 0.1 per cent the quarter, the smallest

quarterly increase in this index since the March quarter 1999. A slight

increase in general medical fees was largely offset by a small increase

in bulk billing ratios and the impact of the Medicare Plus safety net on

out of hospital medical expenses.

The key medium-term influences on inflation point to continuing modest

outcomes, with inflation expected to remain within the medium-term target

band. Labour and other business input costs are expected to remain contained.

In addition, leading indicators for the housing sector are showing an easing

in activity, suggesting that price pressures in the construction industry

should moderate.

Once again this outcome confirms that the Government’s macroeconomic

policies are delivering an environment conducive to moderate inflation and

strong economic growth.

MELBOURNE

27 October 2004

Contact: David Alexander

(03) 9650 0244