NO.092

Consumer Price Index – September Quarter 2005

Today’s Consumer Price Index (CPI) shows that inflation in Australia

remains moderate.

The All Groups CPI increased by 0.9 per cent in the September quarter, to be

3.0 per cent higher through the year, largely reflecting the impact of rising

world oil prices. A sharp increase in world oil prices led to a strong 11.6

per cent rise in automotive fuel prices in the September quarter, contributing

around 0.4 of a percentage point to the overall increase in the CPI.

Excluding the impact of automotive fuel prices, the CPI increased by 0.5 per

cent in the September quarter and 2.1 per cent through the year.

Housing costs also rose in the September quarter. Continuing high levels of

construction activity in some capital cities contributed to a 1.2 per cent rise

in house purchase prices, driven by increases in labour and material costs.

Seasonal increases in utilities prices and property rates and charges also contributed

to the overall increase in housing costs. Price increases were recorded for

holiday travel and accommodation (up 2.8 per cent), alcohol and tobacco (up

1.0 per cent) and food (up 0.8 per cent).

Partly offsetting these price increases were falls in a range of items. In

particular, health costs fell by 1.1 per cent in the September quarter. This

reflected a 4.8 per cent fall in pharmaceutical prices due to the effect of

the Pharmaceutical Benefits Scheme safety net. Hospital and medical services

also fell, driven by an increase in bulk billing and the impact of the Medicare

Plus Safety Net. Price falls were recorded for poultry (down 1.9 per cent),

audio, visual and computing equipment (down 1.7 per cent), motor vehicle repair

and servicing (down 0.8 per cent), and household supplies (down 0.3 per cent).

In the September quarter the ABS introduced the 15th series CPI, which more

accurately reflects current household consumption patterns in Australia. The

most notable change is the introduction of a financial services index into the

CPI, which measures the cost of financial services, including bank charges and

the costs of real estate and stock broking transactions.

The medium-term outlook is for underlying inflation to remain moderate. Price

pressures in the construction industry should ease, given the recent slowing

in housing activity. Labour costs and other business input costs are expected

to remain contained.

The Australian economy continues to perform remarkably well, in the face of

a sharp rise in world oil prices. This reflects a judicious mix of economic

policies and a dynamic and flexible economy, which will assist in maintaining

Australia’s impressive economic performance in the period ahead.

MELBOURNE

26 October 2005

Contact: Amanda Kennedy

03 9650 0244