Australian inflation likely took its largest decline on record in the second quarter as the government made child care free to help families through the COVD-19 lock down and petrol prices tumbled, though much of that will reverse this quarter.
FILE PHOTO: Bourke Street mall, a normally busy shopping hub in Melbourne, is seen devoid of people after the city re-entered Stage 3 restrictions as part of efforts to curb a resurgence of the coronavirus disease , July 23, 2020. REUTERS/Sandra Sanders
That would be a major setback for the Reserve Bank of Australia which had spent years trying to get inflation back up into its 2-3% target band and had been making progress with a reading of 2.2% in the first quarter. “Inflation is likely to remain very subdued given elevated unemployment, weak housing rents and new dwellings costs which make up around 15% of the CPI basket, along with the disinflationary impetus from China’s factories,” said Tapas Strickland, at economist at NAB.
Rather this is a one-off caused in part by the government making child care free from early April to late June, which alone will take around 1.1 percentage points from CPI.Likewise, petrol dived in line with a slide in oil to less than zero, though again that has since rebounded.
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