The latest inflation data for the December 2005 quarter released today by the Australian Bureau of Statistics shows that inflation continues to remain under control thanks to continuing price restraint by Australian industry.

Inflation increased by only 0.5 per cent during the quarter and by 2.8 per cent in the 12 months to December 2005.

Contributing most to the overall increase this quarter were:      

• deposit and loan facilities (2.3 per cent), vegetables (6.8 per cent), domestic holiday travel and accommodation (3.3 per cent), house purchase (0.8 per cent), fruit (5.8 per cent), rents (0.7 per cent), take away and fast foods (1.2 per cent), other financial services (0.8 per cent), bread (3.6 per cent), tobacco (0.6 per cent), other household supplies (1.3 per cent) and other recreational activities (1.8 per cent).
• Partially offsetting these increases were falls in audio, visual and computing equipment (3.2 per cent), pharmaceuticals (4.6 per cent), motor vehicles (1.1 per cent), overseas holiday travel and accommodation (2.5 per cent), automotive fuel (0.9 per cent) and telecommunication (0.8 per cent).

A breakdown of the inflation data shows that inflationary pressures varied amongst the states with Perth recording the largest annual increase at 4.0 per cent. This was followed by Canberra at 3.1 per cent; Darwin at 3.0 per cent; Hobart at 2.9 per cent; Brisbane at 2.8 per cent; Melbourne and Adelaide each at 2.7 per cent; and Sydney at 2.5 per cent.

While headline inflation is running at 2.8 per cent core inflation is running at only 2.3 per cent which should be enough to persuade the Reserve Bank to leave interest rates on hold for some time.

Inflation in the non-tradable sector increased by 0.8 per cent during the quarter compared to no change for the tradable sector. Through the year to December the non-tradable sector rose by 3.5 per cent while the tradable sector rose by 2.0 per cent.

The release of the December 2005 quarter inflation data comes 2 days after the release of the producer price indexes for the same period which showed that final stage prices increased by 0.8 per cent during the December quarter and by 3.0 per cent during the 12 months to December.

During the same period raw material prices increased by 1.1 per cent and by 6.2 per cent during the 12 months to December. Prices of intermediate goods increased by 1.0 per cent during the quarter and by 4.8 per cent during the year to December 2005.

The data for the printing industry shows that while the price of materials used in the industry was reported to have fallen by 0.3 per cent during the December quarter, the annual change represented a modest rise of 0.7 per cent.

The price of articles produced by the printing industry recorded a marginal increase during the quarter and was reported to have increased by only 0.7 per cent for the year to December 2005.

Printing Industries Manager of Industry and Commercial Policy, Hagop Tchamkertenian, welcomed the December 2005 inflation outcome as a further sign that inflationary pressures remain under control.

"Over the past three days we have had the release of producer prices and now consumer prices. Both should provide comfort to the Reserve Bank that inflation continues to remain under control," he said.

"One of the concerns is that profit margins continue to be squeezed with input prices rising at a faster rate than output prices.

"Just how long will businesses be prepared to suffer falls in profit margins is probably now a key consideration.

"The effect of a more globalised economy can also be seen by the inflation data with a significant difference being reported between industries exposed to foreign competition and those that face limited or no foreign competition."

To access the ABS inflation summary document please click here.