The Consumer Price Index (CPI) fell 1.9% in the June 2020 quarter according to the Australian Bureau of Statistics (ABS), with an annual deflation rate of 0.3%.
Since 1949, this was only the third time annual inflation has been negative. The previous times were in 1962 and 1997-98.
The June quarter fall was mainly the result of free child care (-95.0%), a significant fall in the price of automotive fuel (-19.3%) and a fall in pre-school and primary education (-16.2%), with free pre-school being provided in NSW, Victoria and Queensland.
If you had excluded those components, CPI would have actually risen 0.1% for the June quarter.
There were some areas that saw strong price inflation which could be attributed to the impacts of COVID-19, including a 6.2% rise in cleaning and maintenance products prices, and a 4.5% rise in the price of other non-durable household products, which includes toilet paper.
These CPI numbers actually showed lower levels of deflation that many economists expected but the announcement doesn’t seem to have had any positive effect on ASX share prices.
Sam Green is the Portfolio Manager at Emerald Financial, whilst also being an Equities and Derivatives expert for his clients at TradersCircle.
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