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Inflation rises despite consumer spending fall

June quarter results are expected to show a consumer price index rise of about one percent, bringing the yearly rate to 4.3 percent: significantly higher than the Reserve Bank’s target band of two to three percent. Petrol prices contributed approximately 0.25 percent to inflation and are expected to continue in the September quarter.

The rise comes despite the fall in consumer spending in the same quarter, although the Reserve Bank seems confident that their methods are working. It will take at least another six months to bring down the consumer price index, says Brian Redican, senior economist at Macquarie Group.

“We have got the slowdown in spending now and the Reserve Bank’s really confident that that’s going to last for the next six to nine months,” he said. “But it will really take until the end of the year before we start seeing more widespread signs of slowing price growth.”

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