March quarter Consumer Price Index; First Home Owners’ Scheme; ACCC Petrol investigation

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March quarter Consumer Price Index; First Home Owners’ Scheme; ACCC Petrol investigation


Press Conference
Thursday, 24 April 2002


SUBJECTS: March quarter Consumer Price Index; First Home Owners’ Scheme;

ACCC Petrol investigation


Today’s Consumer Price Index for the March quarter indicated that inflation

was running at a level of 2.9 per cent during the year which is a very positive

outcome. It shows that the rate of inflation has fallen from 3.1 to 2.9 per

cent, that it is back within the band which the Government has set with the

Reserve Bank of 2 to 3 per cent, and notwithstanding a very strongly growing

economy that inflation is subdued. The principal rises, as you would expect,

were in the area of holiday travel and insurance coming off the back of the

Ansett collapse, the ticket levy, September the 11th, the effect that that has

had in relation to insurance. But there were actually some declines in relation

to fruit and vegetables, furniture prices, household appliances, clothing and

footwear. The Producer Price Index data which was released earlier this week,

which measures producer prices, was also very subdued, moving at 0.2 per cent

for the quarter and 2 per cent for the year, so that shows that there are no

great price pressures in the upstream area, the producer price area, either.

And that is indicative of good inflation outcomes, that is low inflation outcomes

over future quarters. An economy which is now growing strongly on low inflation

is a good opportunity for job creation, and considering that we have come through

such a significant international down-turn the Australian economy has shown

remarkable resilience, one of the fastest, if not the fastest, growing economy

in the industrialised world growing now on low inflation.


(inaudible) next month in line with the consensus that it would add to the

case for (inaudible)…?


Well, the, today’s CPI actually shows that the annual rate of consumer price

increases is declining. That is, it came down from an annual rate of, an annualised

rate of, through the year rate of 3.1 per cent to 2.9 per cent, so it actually

declined. And as I said earlier, the Producer Price Index which was released

earlier this year, which is producer prices, it is more upstream and therefore

more of a leading indicator, was also very subdued. And that would bode well,

I would think, for future quarters.




I think yes, the Producer Price Index being as low as it was, and that is

more upstream, indicates that you would have subdued inflation in future quarters

which I think is good news for consumers.


How does this impact on interest rate rises?


Well, I think that if you looked at these figures you would see a picture

of the economy which is growing strongly, but is growing with low inflation.

And, in fact, inflation is now back within the 2 to 3 per cent band.


Are interest rises likely?


Look, I never talk about future movements in interest rates, as you know.

But we are looking here at the inflation data. The inflation data shows that

the annual through the year rate of inflation is coming down. It is now back

within the band of 2 to 3 per cent and we are doing that on an economy which

is growing faster than practically every other developed nation in the world,

so, that is good news.


(inaudible) just on something else. There is a little bit of confusion out

there about when the Home Owners’ Grant is going to expire, or if it’s going

to expire. Is it due to end on June 30th?


The, there are two components, there is the First Home Owners’ Scheme of $7000

and then the Government announced, in addition to that, an additional $7000

grant for the construction of new homes. The additional grant was wound down,

the additional $7000 was wound down to, was wound down from 1 January and will

disappear on 30th of June leaving the continuation of the original scheme which

is a $7000 grant in place.

The original scheme, the original $7000 will continue. The additional $7000

was time limited and on top of that and will be phased out from the 30th of



Was that originally expected to end on the 30th of June?


No. Nor is it being time limited.


(inaudible) comments to make in relation to the ACCC investigating possible

collusion and price fixing among the major oil companies?


We would expect that if credible evidence is given to the Competition Commission

of any breach of the Act – price collusion, or any other breach of the Act –

that it would investigate it and it would investigate it very thoroughly. It

has extensive powers to enter premises and to seize documents. It has exercised

those powers, it has an obligation to investigate, and, if there is evidence,

to bring proceedings in a court of law, in a proper place. But it is too early

to say what the nature of the evidence is, it is obviously still being investigated.

But if there is credible evidence of a breach of the Act then it has the obligation

to investigate and I would expect it to do so, and that in fact is what it is

doing. I have spoken to the Chairman of the Commission this morning who has

given me an outline of the matters that he is investigating. Nobody should jump

to any conclusions. The reason you have an investigation is to try and see what

evidence there is and if there is sufficient evidence you bring a charge in

the proper place and you bring it before the courts. But it is too early in

the day to say whether or not that will occur.


Did he give you any indication whether or not there has been sufficient evidence

so far?


They believe that there is credible evidence requiring an investigation. They

will now conduct the investigation. If that leads to evidence of a breach of

the Act then proceedings will be laid. But we are not at that stage. All they

are doing at the moment is an investigation, as you would expect them to do.


Mr Costello, can I get you to repeat your earlier comments for those of us

who sadly came late, in relation to inflation and the impact on the economy?


I’d better make sure I say the same words as I did earlier.

Today’s Consumer Price Index showed an increase of 0.9 per cent for the March

quarter and for inflation to be 2.9 per cent higher than it was a year ago.

This actually shows that the rate of inflation has declined from an annual

rate of 3.1 per cent to 2.9 per cent and the rate of inflation is squarely within

the target range that the Government has set with the Reserve Bank of 2 to 3

per cent. The good news is that we have a strongly growing economy, an economy

which is growing really as fast, or faster, than all the other developed economies

of the world, and we are growing strongly with a low inflation rate. Now that

is good for consumers because prices are not moving strongly against them. But

the strong growing economy is also good for jobs creation and we have seen that

over the last 3 months. So we have the picture of an Australian economy which

is high growth, low inflation, and that is the kind of picture that we would

like to continue.


What sort of pressure otherwise does that put on interest rates, on the movement

of interest rates?


Well, I think the Consumer Price Index, the measure of consumer prices is

within the range and has actually declined, that is the good news. Other measures

of inflation, the Producer Price Index, which measures prices further back in

the chain, at the producer level, are actually very subdued too. So, that bodes

well for continuing low inflation over (inaudible) quarters.


There has been speculation though that interest rates are on the way up. Do

you think that this will augur against that?


People will always speculate but the one person who can’t speculate is me,

and I haven’t and I won’t. But the news of today is that the Consumer Price

Index shows moderate inflation in a high growth economy.

Thank you all very much.