A lack of inflation was once seen as a good thing. However, in recent years, it has been viewed as symptomatic of an economy which is under-utilised, even as employment in some countries approaches levels which have historically been considered to represent full employment.
Figures for the June quarter have now been released by the ABS and while the headline number was weaker than the expected 0.40%, seasonally-adjusted and core inflation figures were pretty much in line with expectations. The headline rate of inflation was 0.20% for the quarter while seasonally-adjusted inflation came in at 0.40%. On a 12-month basis, each recorded 1.90%.
“Core” inflation measures favoured by the RBA, such as the “trimmed mean” and the “weighted median”, were in line with consensus when considered together. For the quarter, both the trimmed-mean and weighted-median measures increased by 0.50% and the average of the two annual rates came in at 1.8%.
The main drivers of the low headline inflation figure were lower petrol prices, falls in prices for telecommunication equipment and services as well as women’s clothing. Cyclone Debbie was expected to have an effect on fruit and vegetable prices but apparently supermarket competition negated price pressures from reduced supply.