Finance Finance News Consumers win on childcare costs, pay more for petrol, travel

Consumers win on childcare costs, pay more for petrol, travel

Australian dollar
Inflation slowed down to 0.5 per cent in the three months to September 30. Photo: Getty
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Australia’s inflation rate rose a tiny 0.4 per cent in the September quarter as consumers enjoyed significant savings in childcare costs but faced price pain at the petrol pump and when paying for overseas holidays.

The figure, released on Wednesday, was just short of market expectations of 0.5 per cent.

It puts the annual consumer price index rise for the year to September at 1.9 per cent – below the Reserve Bank’s target of 2-3 per cent a year.

The most significant price rises in the September quarter were in international holiday travel and accommodation, up by 4.3 per cent.

Fruit costs were up 2.4 per cent, while property rates and charges rose 2.3 per cent.

Those rises were partially offset by a notable fall in child care costs, down 11.8 per cent. That shift was predicted by analysts, and follows the introduction of the federal child care subsidy in July.

The cost of telecommunications equipment and services also continued to fall, down by 1.5 per cent in the quarter.

My Housing Market chief economist Andrew Wilson said it was nearly three years since underlying inflation had reached the RBA’s 2-3 per cent benchmark.

“Stubbornly low inflation reflects a stagnant underlying performance by the national economy despite over two years with the lowest official rates in history,” Dr Wilson said.

“Despite a robust labour market, prices and wages growth remain subdued and clearly indicate the need for more stimulation – and soon.”


inflation september quarter
Falling childcare prices were one of the biggest contributors to the small rise. Photo: Getty



The September quarter changes were broadly in line with the RBA’s expectations. In August, it noted “changes to childcare subsidies and TAFE and car registration fees, as well as some recent reductions in utilities prices” would constrain September inflation.

But the Australian dollar slipped on Wednesday afternoon after the weaker-than-expected data cemented analysts’ views that monetary policy would remain accommodative for a long time to come.

The Reserve Bank has kept interest rates at an all-time low of 1.5 per cent since August 2016. That’s not likely to change in the near future, with interest rate futures not fully leaning towards a rise until March 2020.

Inflation restraining interest rates

The official cash rate, set by the RBA on the first Tuesday of each month, is heavily influenced by CPI growth. Low inflation will likely mean interest rates remain low to try to encourage consumer spending and stimulate the economy.

AMP chief economist Shane Oliver said the latest figures made it unlikely the RBA would raise rates for some time. In fact, a further cut to the already historically low rate was “still possible”.


Analysts said the RBA was likely to look through the weakness in the third-quarter data as it was well flagged and included some one-off price decreases.

“But if Q4 is low, it would be material for the RBA’s ‘next move is up’ view,” said George Tharenou, Sydney economist at UBS.

-with AAP