Finance Finance News Inflation undershoots Reserve Bank target yet again

Inflation undershoots Reserve Bank target yet again

The result is worse than many expected. Photo: Getty
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Inflation has risen by only 0.5 per cent for the December quarter, an uncomfortably low result that is a sign of continuing slow demand in the economy.

The annualised rate of the consumer price index is now 1.5 per cent, slightly up from where it was in the September quarter (1.3 per cent), but down from where inflation was at the end of 2015 (1.7), Australia’s statistics bureau reported on Wednesday.

Rising costs for tobacco (7.4 per cent), automotive fuel (6.7), vegetables (2.5) and restaurant meals (1.1) were some of the biggest contributors to rising prices, but weren’t enough to push the result closer to the Reserve Bank’s target.

There’s still no sign of when inflation will rise into the central bank’s target band of 2-3 per cent ‘over the medium term’. This marks the ninth consecutive quarter that inflation has been well below it.

Wednesday’s result was also a miss for market expectations. Many experts predicted a stronger 0.7 per cent for the quarter.

Underlying inflation, which strips out volatile price movements, was 1.55 per cent over the year, after a quarterly rise of 0.4 per cent.

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