Inflation stays low at 0.5pc for September quarter

Stubbornly low inflation has left the door open for the RBA to cut interest rates again in coming months.

Overall consumer prices are growing slowly despite big jumps in some areas, the ABS’ September quarter inflation data shows. Picture: AAP

Australian consumer prices remained subdued in the third quarter, keeping the door open to a further interest-rate cut in coming months.

The consumer price index rose 0.5 per cent from the second quarter, and by 1.7 per cent from a year earlier, the Australian Bureau of Statistics said Wednesday. The result were in line with economists’ expectations.

Underlying inflation, which is critical to the setting of official interest rates, was slightly softer than expected. Trimmed-mean inflation rose 0.4 per cent on quarter, while the weighted-median measure of inflation rose 0.3 per cent on quarter.

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The Australian dollar was slightly firmer after the data as traders said the report didn’t point to the need for a cut interest rates as early next week’s central bank policy meeting.

Weak wages growth and a stubbornly slack job market are underpinning soft inflation outcomes, with on-year inflation languishing below the Reserve Bank of Australia’s 2 per cent-3 per cent policy target for nearly four years.

The RBA has responded to soft inflation and slowing GDP growth by cutting its benchmark cash rate three times since mid-year, with RBA Governor Philip Lowe saying on Tuesday that the central bank stands ready to cut rates further if needed.

With official interest rates at record lows, a discussion is underway in markets about the prospect of alternative policy measures from the RBA in 2020.

Dr Lowe has said a range of policy measures could be deployed, while stressing negative interest rates would be “extremely unlikely.”

The most significant price rises in the quarter were in the areas of international holiday, travel and accommodation, tobacco, property rates and charges, and child care, the ABS said.

The most significant price falls were for automotive fuel, fruit and vegetables.

“Despite the price falls for fruit and vegetables this quarter, the drought is impacting on the prices for a range of food products,” said ABS Chief Economist, Bruce Hockman said.

Prices rose during the quarter for meat and seafood, dairy and related products, and bread and cereal products, Mr. Hockman said.

Dow Jones Newswires