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Australian consumer prices only rose 0.9% in 2020, which is good news for mortgage borrowers and workers.
Headline inflation remains well below the Reserve Bank of Australia’s 2-3% inflation target, which is used to determine interest rate movements.
RBA Governor Philip Lowe pledged in early December that interest rates would stay at an all-time high of 0.1 percent for at least three years.
Mortgage borrowers are expected to continue to benefit from mortgage rates below 2% after the Australian Bureau of Statistics on Wednesday revealed an annual increase in inflation of just 0.9%.
Workers deprived of decent pay increases are also expected to benefit from rising inflation at an even slower pace than the tiny 1.4 percent increase in the wage price index.
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Australian consumer prices only rose 0.9% in 2020
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The consumer price index in the December quarter rose 0.9% in three months, with the quarterly figure matching the annual figure.
It was even smaller than the 1.6 percent increase in the September quarter, but much larger than the 1.9 percent drop in prices in the June quarter – the worst episode of deflation since the Great Depression from the 1930s.
A 7.5% drop in electricity prices was the main drag on headline inflation in the December quarter, as costs for clothing and footwear fell 1%.
Prices for women’s clothing also fell 5.4% amid the Black Friday cuts last November.
The end of free child care by the federal government saw these costs increase by 37.7% in the last three months of 2020.
Cigarette prices also rose 10.9% after a 12.5% increase in excise duties on tobacco.
With Australians banned from traveling abroad for leisure, most of the competition for motels meant a 6.3% increase in national holiday costs, as state and territory borders were randomly reopened before Christmas .
Melbourne recorded Australia’s highest inflation, with the CPI rising 1.5% in the December quarter, compared to Sydney 1%, Brisbane 1.1%, Adelaide 0.7%, 0.8% in Hobart and Canberra and 0.6% in Darwin.
Perth has experienced quarterly deflation, with prices falling by one percent as Western Australia’s Labor government subsidized electricity.
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