Sydney: Australian consumer prices rose 0.7 percent in the three months to June as petrol prices increased, official data showed Wednesday, but annual inflation was soft, giving the central bank leeway to lower interest rates.
The Consumer Price Index (CPI) increase in the second-quarter followed a 0.2 percent lift in the first three months of the year and took the annual headline rate of inflation to 1.5 percent, the Australian Bureau of Statistics reported.
The latest figures were broadly in line with market expectations, with economists forecasting a 0.8 percent rise for the period for an annual reading of 1.7 percent.
The Australian dollar rose slightly, buying 74.29 US cents after the data was released.
Underlying or core inflation, which strips out volatile items and is more closely watched by the central Reserve Bank of Australia, was 0.55 percent for the quarter to take the annual rate to 2.3 percent.
The annual core reading fell comfortably within the Reserve Bank of Australia`s two to three percent inflation target band.
The RBA has slashed the cash rate by 50 basis points this year -- in February and May -- to take it to a new record-low of 2.0 percent to boost growth as Australia struggles to shift away from an unprecedented mining investment boom that has helped the economy avoid recession for more than two decades.
"In terms of what the RBA would do, this is middle-of-the-road, it doesn`t change their assessment either way," JP Morgan`s chief economist for Australia Stephen Walters told AFP.
"Inflation`s been quite low for a while and that`s why they`ve been cutting interest rates.
"It`s still low on this evidence but maybe on the core rates at least you`re getting a bit of a turn in what`s been pretty low inflation rates for quite a while."
Fuel prices jumped 12.2 percent in the June quarter, while medical and hospital services rose 4.5 percent and new owner-occupier housing purchases by 1.5 percent.
Domestic holiday travel and accommodation moved in the opposite direction, falling 5.4 percent, while pharmaceutical prices slipped 1.8 percent.
The Australian economy has been subdued, with spending in non-mining sectors so far failing to fill the gap left by falling resources investment.
The unemployment rate has hovered around a decade-high of 6.0 percent over the past year and wages growth is weak.