Rent prices take first quarterly fall since 1972

Andrew Cummings
July 31, 2020

SYDNEY-Australia's annual inflation turned negative for the first time in 22 years in the pandemic-hit second quarter as government childcare subsidies and lower oil prices fueled the biggest quarterly fall on record.

Prices for consumer goods dropped by 1.9 per cent in the June quarter, the largest quarterly fall in the 72-year history of Australia's Consumer Price Index.

This CPI measure hasn't gone backwards so dramatically in nearly 60 years but the quarterly plunge was the steepest since the early 1930s Great Depression, as a result of cheap petrol, free childcare and discounts on rent.

ABS chief economist Bruce Hockman said negative annual inflation was rare for the Australian economy.

The record drop in CPI is mainly linked to the Federal Government's decision to heavily subsidise childcare prices during the early days of the COVID-19 pandemic.

There was a 95 per cent reduction in childcare costs over the June quarter, along with a 16.2 per cent drop in preschool and primary school fees.

The average cost of fuel fell 19.3 per cent over the three months to June, dragging down the CPI.

The downward trend coincided with the biggest drop in consumer prices since 1931, with the consumer price index for the June quarter falling 1.9 per cent.

CommSec chief economist Craig James said this was the steepest three-month decline in 89 years.

In addition, the prolonged hot weather has resulted in a high demand for electricity and water, pushing prices of electricity up by 2% and prices of water up by 0.25% over the previous month.

According to the General Statistics Office (GSO), nine out of 11 groups of goods and services posted price increases in July.

Rents also decreased by 1.3 per cent, a measure that captured all current rents including public housing, not just new rental contracts. Mr Hockman said: "Since 1949, this was only the third time annual inflation has been negative".

Australian has seen negative inflation in 1962 and 1997-98 previously.

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