Australia’s Q1 CPI sees first fall since 2008

SYDNEY, April 27, (AFP): Australian consumer prices fell in January-March for the first time since 2008 during the global financial crisis, data showed Wednesday, putting pressure on the central bank to cut interest rates and sending the local dollar tumbling.

The statistics bureau said the consumer price index (CPI) fell 0.2 percent in the quarter from the previous three months -- when prices had risen 0.4 percent -- as plunging world oil prices sent the cost of fuel lower.

The Australian dollar sank from 77.66 US cents to 76.54 cents soon after the figures were released as traders bet on a fresh cut in interest rates.

The Reserve Bank of Australia (RBA) has already slashed borrowing costs to a record low of two percent as authorities try to shore up the economy which is exiting an unprecedented mining investment boom at a time of tumbling commodity prices

For the year to March, inflation came in at just 1.3 percent, well down from the 1.7 percent hike over the year to December.

ANZ senior economist Jo Masters said the figures were “extremely weak, with both headline and underlying inflation well below expectations”.

The RBA has targeted an underlying rate of 2.0-3.0 percent but the latest figures had the underlying measures of trimmed and weighted mean at 1.7 percent and 1.4 percent in the year to March.

“Today’s data puts the RBA in a difficult position,” Masters said. “The inflation pulse is weak and it now seems likely that underlying inflation will remain below the policy target band for some time.

“That said, domestic activity looks solid at the moment, although the RBA would be cognisant that some of the tailwinds are likely to fade in the second half of this year.”