June quarter CPI data shows biggest fall in inflation on record
The biggest bout of consumer price deflation in 72 years has gripped the economy, latest ABS data shows.
The biggest bout of consumer price deflation in 72 years has gripped the economy, underpinned by the coronavirus recession, free child care, plunging petrol prices, and falling rents.
The consumer price index dropped an unprecedented 1.9 per cent over the three months to the end of June, leaving the annual rate of inflation over the full financial year at minus 0.3 per cent
“Since 1949, this was only the third time annual inflation has been negative. The previous times were in 1962 and 1997-98,” ABS chief economist Bruce Hockman said in a statement on Wednesday.
“This was the largest quarterly fall in the 72 year history of the CPI,” he added.
Rents for residential dwellings recorded the first quarterly fall since 1972.
“Weak rental market conditions as a result of COVID-19 lockdown restrictions and rising vacancy rates saw rents fall in most capital cities in the June quarter,” the ABS said in a statement.
Economists had expected the consumer price index, which underpins social security payments and wage negotiations, to fall in the June quarter, given state and federal government policies to make child care and preschool free temporarily, and a sharp fall in global oil price.
“Excluding these three components, the CPI would have risen 0.1 per cent in the June quarter,” Mr Hockman explained.
The Reserve Bank was expecting a weak inflation outcome, and is unlikely to change monetary policy in light of the weak inflation outcome.
On the Reserve Bank’s preferred measure of inflation, which excludes volatile items, prices were broadly unchanged in the June quarter, to finish the financial year 1.2 per cent higher.
The decline in CPI will also see one of the largest increase in real wages in recent years.
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