Country Report Australia October 1996 Main report

Employment, wages & prices: Inflation has peaked

The consumer price index rose by 0.7% during the second quarter of 1996, bringing the annual rate of inflation down to 3.1%. Underlying inflation, the Treasury measure which tries to remove the effects of interest rate rises and other policy changes and erratic items from the calculation, rose by 0.8% during the quarter, to an annual rate of 3.2%. At this level, underlying inflation is just above the Reserve Bank's target range of 2-3%. The GDP deflator rose by 0.8% during the second quarter, bringing the average increase for 1995/96 to 2.7%.

Upstream price indicators relating to manufacturing and construction were flat during the second quarter; for example, the prices of inputs of materials used by manufacturing and construction were generally below year- earlier levels. This, together will sluggish economic activity, suggests that inflation will remain low.

Prices and wages (% change quarter on quarter unless otherwise indicated) 1995 1 Qtr 2 Qtr 3 Qtr 4 Qtr Consumer prices 1.7 1.3 1.2 0.8 Food 2.1 0.4 1.5 0.3 Non-food 0.6 1.5 1.1 0.8 Consumer prices (annual rate) 3.9 4.5 5.1 5.1 GDP implicit price deflator(a) (annual rate) 2.1 3.1 3.4 3.0 Average weekly earnings(b) (annual rate) 4.4 4.8 5.1 4.9 1996 1 Qtr 2 Qtr Consumer prices 0.4 0.7 Food 0.2 1.0 Non-food 0.5 0.6 Consumer prices (annual rate) 3.7 3.1 GDP implicit price deflator(a) (annual rate) 2.6 2.3 Average weekly earnings(b) (annual rate) 4.2 3.9 (a) GDP by expenditure. (b) Mid-period ordinary time earnings. Source: Australian Bureau of Statistics, Australian Economic Indicators.

© 1996 The Economist lntelligence Unit Ltd. All rights reserved
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