Australia Annual Inflation Turns Negative for First Time Since 1998

Marco Green
July 31, 2020

Australia has recorded the largest ever quarterly fall in inflation of 1.9% after the Morrison government temporarily made childcare free due to the coronavirus crisis.

However, it was parents who saw the most benefit, with lower childcare costs and schooling fees fuelling the wider drop, as well as lower fuel prices.

This CPI measure hasn't gone backwards so dramatically in nearly 60 years but the quarterly plunge was the steepest since the early 1930s Great Depression, as a result of cheap petrol, free childcare and discounts on rent.

Chief Economist for the ABS, Bruce Hockman said: "This was the largest quarterly fall in the 72 year history of the CPI".

The change differed for each of Australia's states and territories, ranging from a one per cent drop in Adelaide to a down 2.5 per cent slump in Darwin.

The Bureau of Statistics said the price drop was mainly due to free child care, a 19.3 per cent fall in fuel prices and a big fall in preschool and primary education costs due to free preschool in New South Wales, Victoria and Queensland.

Director of the GSO's Price Statistics Department Do Thi Ngoc said the CPI rose in July on the back of higher prices of petrol, gas, electricity, and water due to increasing demand.

"The last time consumer prices fell by 1.9 per cent over a quarter - that is, over a three month period - was in 1931".

There were, however, notable increases in the prices of certain goods.

Rents also decreased by 1.3 per cent, a measure that captured all current rents including public housing, not just new rental contracts.

The headline annual inflation rate was also negative, at -0.3 per cent, which is only the third time this has occurred, with the previous yearly price falls in 1962 and 1997-98.

CommSec chief economist Craig James said this was the steepest three-month decline in 89 years. Mr Hockman said: "Since 1949, this was only the third time annual inflation has been negative".

Other reports by Click Lancashire

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