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Katina Curtis, AAP Senior Political Writer
(Australian Associated Press)
Free childcare and cheaper petrol have driven the cost of living in Australia backwards for only the third time on record.
The record 1.9 per cent fall in the consumer price index across the June quarter adds to a picture Prime Minister Scott Morrison says everyone should recognise as the negative impact of the coronavirus pandemic on the economy.
The Australian Bureau of Statistics reported the annual inflation rate at -0.3 per cent.
It’s the first time in 22 years the annual rate has been negative and only the third time on record.
The fall was driven largely by free childcare and preschool and a nearly 20 per cent drop in petrol prices.
‘”Excluding these three components, the CPI would have risen 0.1 per cent in the June quarter,” ABS chief economist Bruce Hockman said.
CommSec chief economist Craig James said the last time inflation dropped by 1.9 per cent was during the global recession in 1931, when it was measured on a different index.
“Fortunately policymakers today have responded differently to back then, applying significant fiscal and monetary stimulus to limit the length and severity of the downturn,” he said, noting prices were tipped to rebound in the September quarter.
“The last thing anyone wants to see is deflation – a sustained period of falling prices – because that could see the current economic downturn being extended.”
Mr Morrison said he was more concerned by Tuesday’s payroll data, which showed the Victorian surge of coronavirus cases and second lockdown in Melbourne was dragging down the jobs recovery in other states as well.
“There is a significant Victorian wave but that Victorian wave is impacting the national economy more broadly,” he told reporters in Canberra.
“We’re seeing that in the payroll data, we’re also seeing that in things like table bookings at restaurants and in states that aren’t affected by COVID in the same way that Victoria has been.
“Australia wins when Victoria wins.”
He couldn’t estimate now when Australia would reach the final stage of domestic reopening.
In May, leaders planned to reach that position by mid-July but the Victorian wave of community transmission has led several states to delay their economic reopening.
Also on Wednesday, the Australian Prudential Regulation Authority updated its guidance on capital management to banks and insurers and the Australian Office of Financial Management issued a new $15 billion, 30-year Treasury bond.