Underlying inflation has slipped below 6%, but is the slide enough to stop the RBA pushing up rates further?

• The quarterly results are consistent with the newer monthly measure of annual inflation which has also been falling since hitting a high of 8.4% in December.
• Helping bring inflation down were state government electricity rebates and cuts in the prices some households paid for medicines.
• The prices of new dwellings grew more slowly as demand eased and problems with the supply of materials improved.
• Conversely, there were sharp increases in the prices of insurance and some other financial services.

Underlying inflation down

• The fall in Australia’s inflation is in line with falls in other Western nations including the United States, Canada and the United Kingdom.
• An exception is China, which has almost no inflation.
• Much of the slide in Australia’s inflation rate reflects weaker economic growth.
• While he would prefer inflation to be falling more quickly, Australia was “making progress”.

What does it mean for my mortgage?

• Today’s news does not suggest the bank needs to lift rates further.
• It shows it is still on what Lowe calls the “narrow path” to getting things right.
• But it is likely to take comfort from the fact inflation is falling as it expected it to, and at about the expected pace.
• At 6%, inflation remains well above its 2-3% target.