Inflation for the March quarter was an incredibly low 0.2 per cent, bringing the 12 month increase to just 1.3 per cent and spelling more worrying news for the Australian economy.

The 12-month rate is well below the Reserve Bank’s target of between 2 and 3 per cent, meaning the bank is now likely to cut the official cash rate in May.

However, the plummeting price of petrol put artificial downward pressure on price rises, meaning things may not be quite as dire as the figure suggests.

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This is the second quarter in a row in which the consumer price index rose by just 0.2 per cent. If it continues for another two quarters (six months) that would put the year’s figure at an incredibly feeble 0.8 per cent.

The Australian Bureau of Statistics said the most significant price rises this quarter were in domestic holiday travel and accommodation (+3.5 per cent), tertiary education (+5.7 per cent) and medical and hospital services (+2.2 per cent).

The plummeting price of petrol (down 12.2 per cent) and fruit (down 8.0 per cent) partly offset these rises, and go some way to explaining the dramatic fall in inflation. 

Over the 12 months to March 2015, automotive fuel has decreased by 22.5 per cent.

The ABS said this was the largest yearly fall in the history of the series, beginning in September 1973.