Australian inflation falls as global economic crisis hits
Posted: 28 January 2009 1117 hrs
Office workers walk past a National Australia Bank sign
SYDNEY: Inflation in Australia fell for the first time in two years in the fourth quarter of 2008 as the global economic crisis slowed the economy, official figures showed Wednesday.
A drop of 0.3 per cent in the consumer price index slashed the annual inflation rate to 3.7 per cent from 5.0 per cent in the 12 months to September, the Australian Bureau of Statistics said.
That is still higher than the central bank's target rate of 2.0 to 3.0 per cent, but economists predict the bank will again cut interest rates after shaving its base rate by 3.0 percentage points since September to 4.25 per cent.
"My feeling is that the Reserve Bank will pay more attention to the ongoing evidence of economic weakness, which if history is any guide will lead to weakness in inflation down the track," said AMP Capital Investors' chief economist Shane Oliver.
He predicted that the bank would cut rates by 0.75 percentage points at its board meeting next Tuesday.
The fall in consumer prices over the quarter was attributed to lower prices for petrol, cars, health products and financial services.
Federal Treasurer Wayne Swan said the drop was further evidence of the impact of the global recession and falling commodities prices on Australia's economy.
Demand in China and other Asian countries for Australian resources such as coal and iron ore had driven the economy for years, but exports have been hit hard by fading growth in major trading partners.
"Inflation is expected to continue to ease over the next six to 12 months, as the full effect of weaker world economic conditions flows through," he told a news conference.
"We domestically are seeing the unwinding of the mining boom. And as that occurs, both the UK, the US, Japan and the eurozone countries are all in recession."
The government's focus had moved from fighting inflation to supporting growth and jobs, Swan said.
A government index released Wednesday showed a fall of 7.7 per cent in skilled job vacancies in January from December and a drop of 43 per cent year on year.
"The sort of data we are now seeing, internationally, for the December quarter in terms of many developed countries is very stark," Swan said. "The premium now is to support jobs and to support growth."
A A$10.4 billion (US$6.9 billion) economic stimulus package released in December had been beneficial, he said, with retail figures showing consumption of many basic items was "very strong" during the quarter.
Asked whether more pump priming measures could be on the way, Swan said the government was ready to take whatever action was necessary to respond to what he called "a global recession".
Posted: 28 January 2009 1117 hrs
Office workers walk past a National Australia Bank sign
SYDNEY: Inflation in Australia fell for the first time in two years in the fourth quarter of 2008 as the global economic crisis slowed the economy, official figures showed Wednesday.
A drop of 0.3 per cent in the consumer price index slashed the annual inflation rate to 3.7 per cent from 5.0 per cent in the 12 months to September, the Australian Bureau of Statistics said.
That is still higher than the central bank's target rate of 2.0 to 3.0 per cent, but economists predict the bank will again cut interest rates after shaving its base rate by 3.0 percentage points since September to 4.25 per cent.
"My feeling is that the Reserve Bank will pay more attention to the ongoing evidence of economic weakness, which if history is any guide will lead to weakness in inflation down the track," said AMP Capital Investors' chief economist Shane Oliver.
He predicted that the bank would cut rates by 0.75 percentage points at its board meeting next Tuesday.
The fall in consumer prices over the quarter was attributed to lower prices for petrol, cars, health products and financial services.
Federal Treasurer Wayne Swan said the drop was further evidence of the impact of the global recession and falling commodities prices on Australia's economy.
Demand in China and other Asian countries for Australian resources such as coal and iron ore had driven the economy for years, but exports have been hit hard by fading growth in major trading partners.
"Inflation is expected to continue to ease over the next six to 12 months, as the full effect of weaker world economic conditions flows through," he told a news conference.
"We domestically are seeing the unwinding of the mining boom. And as that occurs, both the UK, the US, Japan and the eurozone countries are all in recession."
The government's focus had moved from fighting inflation to supporting growth and jobs, Swan said.
A government index released Wednesday showed a fall of 7.7 per cent in skilled job vacancies in January from December and a drop of 43 per cent year on year.
"The sort of data we are now seeing, internationally, for the December quarter in terms of many developed countries is very stark," Swan said. "The premium now is to support jobs and to support growth."
A A$10.4 billion (US$6.9 billion) economic stimulus package released in December had been beneficial, he said, with retail figures showing consumption of many basic items was "very strong" during the quarter.
Asked whether more pump priming measures could be on the way, Swan said the government was ready to take whatever action was necessary to respond to what he called "a global recession".
