Today's data shows that both headline and underlying inflation have continued to moderate through the year, to be at their lowest level in 13 years, providing more evidence that Australia's economic fundamentals are in very good health.
This confirms that inflation in Australia remains well contained - an impressive achievement particularly against a backdrop of strong growth, low unemployment, healthy consumption and a huge pipeline of investment in the resources sector.
The Consumer Price Index (CPI) rose 0.5 per cent in the June quarter 2012, up from 0.1 per cent in the March quarter 2012. Headline inflation was 1.2 per cent through the year to June, down from 1.6 per cent through the year to March. Headline inflation over the year is now at its lowest level since June 1999.
Underlying inflation was 0.6 per cent in the June quarter, up from 0.4 per cent in the March quarter. Underlying inflation was 2.0 per cent through the year to June, down from 2.2 per cent through the year to March, reaching its lowest level since June 1999.
While the moderation in headline and underlying inflation is certainly welcome, many households continue to face cost of living pressures.
A number of factors contributed to the rise in the June quarter CPI, although overall, price rises were reasonably contained. While fruit and vegetable prices are still below their levels prior to last year's natural disasters, they rose 4.6 per cent in the June quarter, contributing 0.1 of a percentage point to headline CPI growth. This was largely due to wet weather conditions which affected the production of some crops in the eastern states. There were also price rises in areas like health, furniture and transport. This was partly offset by a 1.3 per cent fall in recreation and culture prices, which detracted 0.2 of a percentage point from quarterly CPI growth.
With heightened volatility in the global economy, Australia's strong economic fundamentals stand in stark contrast to the rest of the developed world. Not only do we have contained inflation, low unemployment and lower interest rates, but we have solid growth, a massive pipeline of investment in resources, and strong public finances with a budget returning to surplus this year.