Inflation lower than expected

JAMES GLYNN
April 24, 2018
Dow Jones

Inflation in Australia was lower than expected in the first three months of the year, with wages growth remaining flat, likely keeping interest rates locked at record lows for some time. 

Consumer prices rose 0.4 per cent in the first quarter and were up 1.9 per cent from a year earlier, the Australian Bureau of Statistics said.

Economists had expected consumer prices to rise 0.5 per cent in the quarter and 2.0 per cent from a year earlier.

The Reserve Bank of Australia, which targets an annual inflation rate of between 2 per cent and 3 per cent, has kept official interest rates at a record low 1.5 per cent since mid-2016.

Core inflation rose 0.5 per cent in the quarter, as expected by economists. The measure rose 2.0 per cent on-year.

Higher costs for education, natural gas and household fuels, vegetables, pharmaceuticals and medical services contributed to the rise in consumer prices during the quarter, offset by lower travel, computing and furniture costs.

RBA Governor Philip Lowe recently signalled the next move in interest rates is likely to be higher, but with wages growth flat, there is no case to raise them in the near future. Current financial market pricing reflects an expectation that interest rates will be unchanged until 2019.