Australian Inflation Slows to 2.5%

Australia’s annual inflation rate slowed in the first quarter to the weakest pace in 18 months as the nation’s first recession in almost two decades deepens., Bloomberg 4/22/2009 5:22:52 AM

The consumer price index increased 2.5 percent from a year earlier, after gaining 3.7 percent in the fourth quarter, the Bureau of Statistics said in Sydney today.

The outlook for inflation is more likely to be down than up,” central bank Governor Glenn Stevens said yesterday. Weaker inflation, as the biggest surge in the jobless rate since the economy was last in recession in 1991 moderates wage demands, increases the bank’s scope to keep borrowing costs near a half- century low to spur domestic demand.

Financial services costs slumped 14.1 percent in the first quarter and gasoline declined 8.1 percent, today’s report showed. By contrast, drugs rose 13 percent and rents advanced 1.7 percent.

Central bank policy makers cut borrowing costs on April 7 by a quarter point to a 49-year low of 3 percent because rising unemployment and weak domestic demand increases the likelihood inflation will slow, minutes of their meeting released yesterday showed.

The weighted-median gauge of inflation advanced 1.2 percent in the quarter for an annual increase of 4.4 percent.

The central bank aims to keep inflation between 2 percent and 3 percent on average.

Australian Inflation Slows to 2.5%