Australian inflation is still falling and gives the RBA room to cut if they feel the need

Photo: Miguel Villagran/ Getty.

The Melbourne Institute’s monthly inflation gauge for March shows prices were unchanged after a fall of 0.2% during February. As a result of March’s flat result and the roll off of higher prints the headline annual rate collapsed to 1.7%.

That sets up the potential for the RBA to jawbone the Aussie dollar tomorrow afternoon – by discussing lower rates – in the governor’s statement after the monthly RBA board meeting because the headline and trimmed mean (+1.6% annual) are both substantially below the bottom of the RBA’s 2-3% inflation target band.

The core measure of inflation – the one which excludes volatile items like fuel, fruit and vegetables – is a little more sticky but still relatively low at the bottom end of the band. In March core prices were also unchanged which left inflation in the previous 12 months at 2.3%.

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