Australia experiences deflation for first time since 1960 with prices falling 1.9 per cent in a year

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Australia experiences deflation for first time since 1960 with prices falling 1.9 per cent in a year

Australia has experienced deflation where prices are falling for the first time since 1960 as COVID-19 sparks a deep recession.

The Consumer Price Index, normally known as inflation, shrunk by 1.9 per cent in the June quarter alone as a result of the coronavirus pandemic, the Australian Bureau of Statistics has revealed.

This CPI measure hasn’t gone backwards since 1960. 

Despite a surge in people working from home, furniture prices dived by 11.2 per cent in just three months while transport costs plunged by 6.8 per cent as fewer people caught the train and petrol prices fell under $1 a litre.

Australia has experienced deflation where prices are falling for the first time since 1960 as COVID-19 sparks a deep recession

Housing costs fell by 0.7 per cent, as landlords were barred from evicting tenants, while education expenses dropped by 3.7 per cent with schools closed to stop the spread of coronavirus. 

Australia’s first episode of deflation in 60 years occurred even though interest rates are at a record low of just 0.25 per cent.

An an annual basis, prices have fallen by 0.3 per cent – a level significantly below the Reserve Bank of Australia’s two to three per cent target which means interest rates are extremely unlikely to be raised any time soon. 

The COVID-19 pandemic is set to push the Australian economy into a recession for the first time in 29 years as the coronavirus shutdowns spark the deepest downturn since the 1930s Great Depression.   

While unemployment is rising, deflation is good news for those who still have a job, with lower prices good for consumers even if they have missed out on decent pay rises for several years.

Source: Daily Mail Australia | News Colony

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