By Peter Martin
INFLATION has slipped to its lowest in more than a decade, giving the Reserve Bank ample room to further cut interest rates.
The news also calls into question claims that Australians are facing increasing cost-of-living pressure.
The new annual inflation rate of 1.2 per cent reflects dramatic slides in the prices of fruit and vegetables, and also in the prices of staples such as bread, now 3 per cent cheaper than when Opposition Leader Tony Abbott identified it as a problem in the 2010 election.
The Bureau of Statistics says the price of cheese has slipped 1.9 per cent in the past year, the price of meat and seafood 2.1 per cent, the price of children's clothes 1.8 per cent, the price of cars 1.6 per cent and the price of household appliances 2.7 per cent. Increasing sharply at the same time are large regular expenses, such as rent (up 4.4 per cent), electricity (10.7 per cent), gas (8 per cent) and water and sewage (9.3 per cent).
The price of childcare has climbed 9.8 per cent in the past year, education an average of 6.1 per cent, insurance 7 per cent and petrol 2.5 per cent.
The clear pattern is that the prices of goods that can be imported have been sliding, down 2 per cent over the year, while the prices of goods and services produced at home have been climbing, gaining 3.3 per cent over the year. But the prices of imported goods may be stabilising, the figures show. In the past three months they climbed back 0.7 per cent, rather than continuing to fall.
Treasurer Wayne Swan called on ''doomsayers and rentseekers'' to acknowledge that when averaged by the amounts actually spent, prices climbed just 1.2 per cent, less than at any time since the late 1990s.
Shadow treasurer Joe Hockey said the prices that were rising the fastest were those people were least able to avoid paying.
He reached back five years to claim that since the Labor Party had been in office, electricity charges had climbed 64 per cent, water rates 59 per cent, insurance premiums 35 per cent and education fees 31 per cent.
''This is before the carbon tax,'' he said.
''Now is not the time to drive up the price of everything.''
Mr Swan said the low inflation rate completed a set of figures far better than at any point during the previous Coalition government's term in office.
''It is rare in our economic history to have low unemployment, a huge investment pipeline, healthy consumption and contained inflation at the same time,'' he said. ''It's the best possible combination.''
On Monday, the private sector forecaster Deloitte Access Economics said the budget surplus had evaporated, and the mining investment boom had only two years to run.
Financial markets were unimpressed by the inflation result, pushing the market slightly lower on fears that Spain may be headed for a financial bailout.