Official Rate At 0.1% For 3yrsSpeculation that high March Quarter inflation would signal interest rate rises has, once again, shown the inaccuracy of economists’ forecasts.

Inflation is significantly lower than economists expected, further justifying the Reserve Bank’s decision to keep interest rates at record lows.

According to ABS data, headline inflation rose just 0.6% over the March Quarter to 1.1% annually, which is well down on the 0.9% recorded over the December Quarter and the second consecutive fall in the series.

“Speculation that the likelihood of rising March Quarter inflation data would signal the prospect of interest rate rises has predictably, once again, fallen well wide of the mark,” says Andrew Wilson, chief economist at Archistar.

“The outlook for interest rates clearly remains subdued and likely to remain at current levels for years – and beyond the current expectations of the RBA.”

The ABS notes that a number of government schemes were a factor in the March Quarter data, clearly seen in the fall in prices for new dwellings.

“The fall in new dwelling prices was due to the impact of the federal HomeBuilder grant and similar grants by some state governments,” says the head of prices statistics at the ABS, Michelle Marquardt.

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