The consumer price index dropped 0.3 percent from the third quarter, when it gained 1.2 percent, the Bureau of Statistics said in Sydney today. A separate report by Westpac Banking Corp. showed a leading index of economic indicators fell an annualized 2.2 percent, the first negative reading since May 2001.
Australia’s currency slipped as investors added to bets the central bank will next week extend the most aggressive rate cuts since the economy was last in a recession. Building-material maker Boral Ltd. today reduced its profit forecast on weaker housing markets in Australia and the U.S., and Westfield Group’s shares slumped to a record after it said earnings may drop.
Investors have a 60 percent expectation the central bank will reduce the benchmark rate by one percentage point to 3.25 percent on Feb. 3, according to a Credit Suisse Group index based on swaps trading. The bank has lowered borrowing costs by three percentage points since early September.
A leading index of economic growth fell 1 percent in November to 253.5 points. The index’s drop coupled with the further deterioration in the global environment intensifies the risk that the Australian economy will contract through 2009,” said Bill Evans, Westpac’s chief economist in Sydney.
The quarterly price decline was the biggest since September 1997 and was in line with the median estimate of a 0.4 percent drop in a Bloomberg News survey of economists.
Consumer prices rose 3.7 percent from a year ago, cooling from the third quarter’s 5 percent gain. The central bank aims to keep inflation between 2 percent and 3 percent on average.
Gasoline costs dropped 18.2 percent in the quarter and car prices fell 2.4 percent, the report showed. By contrast, property rents rose 1.8 percent.
The price of crude oil traded in New York slumped about 56 percent in the final quarter of 2008 amid increased signs of a global recession.
Easing inflation enables Stevens to join counterparts in the U.S. and Europe, who are focused on reviving their economies.
Evidence suggests Australia may be in its first recession in almost two decades, after the economy grew 0.1 percent in the third quarter, the weakest pace in eight years.
Consumer confidence fell in January, business sentiment was negative for a 12th straight month in December and the jobless rate climbed to a two-year high of 4.5 percent as companies including BHP Billiton Ltd. fired workers.