Inflation rate of Australia has dropped to a thirteen-year low down, freeing the RBA to cut interest rates as well as reducing concerns that the resources success will spark more extensive value rises. Customer prices rose just 1.2 % over a year to June, the lowest yearly increase from 1999. A senior economist at Commonwealth Bank, John Peters said that, wage pressures from the successful resource sector are not flowing into the other economy, who said worries the resource success would fan inflation which had been a concern for the RBA.
Mr. Peters said that, a lack of order for services was "helping place a lid on cost growth other than the mining field", noting the moderately fast rate of growth of supplies and services not influenced by strong Australian dollar had decreased in June quarter. Huge falls in the price of domestic holidays, biscuits, cakes and computing equipment and audio limited customer price increases over the 3 months to June to 0.5 %, offset by rise in the price of medical services, fruit and vegetables and furniture.
Rents rose 1.1 % in the June quarter, whereas the price of electricity dropped 0.8 %. Wayne Swan said that, the low rate was "a significant achievement". The preferred measure of Reserve Bank of consumer inflation, that strips out unstable items, was 2 % over a year to June, on the lower end target band of the Reserve Bank of 2 to 3 %, and aligned with the bank's as well as most economists' current forecasts. Economists approved the bank has space to cut further although most predicted it to wait for some months.
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