Inflation rate cools in June quarter

Card has overtaken cash as the most frequent consumer payment method for the first time

Card has overtaken cash as the most frequent consumer payment method for the first time

The data are broadly consistent with the Reserve Bank of Australia's forecast for inflation, and so won't prompt any big shift in the outlook for interest rates. The annual rate of 1.8% was below the RBA's long-term target band of 2% to 3%, where it has been since the start of 2016. It has nowhere to go. If consumers substituted cheaper goods for those that jumped in price, it could limit the upward impact on the CPI.

Opposition Leader Bill Shorten's recently claimed that inequality has reached a 75-year high prompting Mr Morrison to accuse the opposition of pedalling a "lie".

For now, the RBA remains neutral on the outlook for policy, with the official interest rate stuck at a record-low 1.5% since August a year ago.

This was an RBA toe-dipping exercise that would surely have sent those in the central bank bunker back into their box, given a rising local currency is the last thing the economy needs right now to grow.

To strip out such one-off influences, the Reserve Bank of Australia (RBA) looks at various measures of underlying prices.

Around the world, central banks are now starting to increase or suggest increases to interest rates while others are wondering when to start withdrawing monetary stimulus. It's also struggling with low inflation which it basically admitted to in its policy statement following the conclusion of its 26 July FOMC meeting: "On a 12-month basis, overall inflation and the measure excluding food and energy prices have declined and are running below 2%".

On the other side of the ledger clothing and footwear was once again a contributors to deflation as was petrol.

"This has no automatic implications for monetary policy in Australia", Lowe said.

Compared to the first quarter, the CPI rate accelerated 0.2%.

Such tepid figures combined with Lowe's comments may well put to rest speculation over domestic interest rate hikes which flared up after the Bank of Canada increased its policy rate to 0.75% this month. The policy rates in both the U.S. and Canada still remain below that in Australia.

To the extent that economists can see any near term increase in inflation it will be coming from the increase in energy costs that consumer will have to bear over the coming year. Nor can it afford to do so while it lives with the threat of reigniting a price rise in the housing market.

Plenty of headwinds to inflation remain including record-low wage growth and the recent climb in the Australian dollar.

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