Consumer prices fell by 1.9% in the June quarter, a bit better than the market forecast for a 2.5% slump in the June quarter but still the single largest three-month fall in 72 years, thanks to the impact of the COVID-19 pandemic and lockdowns.
The Australian Bureau of Statistics said the fall took annual inflation to minus 0.3% reading, which was also a bit better than the 0.5% estimate from the market.
That made it the third yearly dip in the CPI since the series started in 1962.
Driving it lower was the 95% drop in the cost of childcare which was made free by the Morrison government in the quarter response to the coronavirus pandemic. That has now been reversed and will boost inflation in the current quarter.
That was well-anticipated by the market, as was the sharp slide in oil and petrol prices – down 19.3% and primary education costs which dropped 16.2% because of changes in policy in NSW and Queensland. Rents fell 1.2%. The ABS said that without these falls the CPI would have been up 0.1% for the quarter which would have seen an annual rate of around 1.5%.
While the headline rate was expected (and the report overall won’t mean much for monetary policy and interest rates) there was a little niggle of concern in the way underlying inflation fell more sharply than expected in the June quarter.
Markets had been expecting a negative result while the ABS itself had cautioned it would have difficulty measuring the prices of certain goods.
While there were some large falls in prices, the bureau noted some goods went up due in part to panic buying by consumers.
The Bureau picked out cleaning and maintenance products (+6.2%); other non-durable household products, which includes toilet paper (+4.5%); furniture (+3.8%); major household appliances (+3.0%); and audio, visual and computing equipment (+1.8%).-
That looks like a bit of price gouging from major retailers who all said they have done well – supermarkets like Coles, Woolies and Metcash, and other retailers like JB Hi, its Good Guys subsidiary, and Harvey Norman.
Markets had been expecting a negative result while the bureau itself had cautioned it would have difficulty measuring the prices of certain goods. That means there could be some later revisions in coming quarters.
ABS chief economist Bruce Hockman said negative annual inflation was rare for the Australian economy.
“Since 1949, this was only the third time annual inflation has been negative. The previous times were in 1962 and 1997-98,” he said.