Annual inflation

At just over 2.25% for the year to September quarter 2013, underlying inflation in Australia is consistent with the central bank's objective of an average inflation rate of between 2% and 3% a year. 

The Reserve Bank of Australia (RBA) expects that, in underlying terms, inflation will stay at or below the centre of the target range until at least mid-2015, with wage growth forecast to remain contained.

In the year to September quarter 2013, Australia's headline inflation rate moderated slightly to 2.2%, and has been broadly stable over the last year, reflecting ongoing strength in the Australian dollar, broad-based competitive pressures within the domestic economy and subdued growth in costs. 

The cash rate target as at October 2013 stood at 2.50%, the lowest on record.

Monetary policy

Since 1993, the RBA has targeted monetary policy toward an average inflation rate of between 2% and 3% a year over the medium term. 

This is considered sufficiently low that it will not distort economic decisions in the community.

The inflation target provides discipline for monetary policy decision making in Australia, serves as an anchor for private sector inflation expectations, and promotes economic growth.

Annual inflation and short-term interest rates, 2013
Country Consumer prices % change on a year ago1 Short-term interest rates % per annum2
India 9.8 8.79
Indonesia 8.4 7.22
Hong Kong SAR 4.6 0.38
China 3.1 4.69
Britain 2.7 0.50
Philippines 2.7 0.29
Australia 2.23 2.55
Sydney 2.1 2.55
Malaysia 1.9 3.11
Singapore 1.6 0.31
United States 1.5 0.24
New Zealand 1.4 2.65
Thailand 1.4 2.40
Germany 1.4 0.22
Euro area 1.1 0.22
France 0.9 0.22
Japan 0.9 0.14
Korea 0.8 2.65
Taiwan 0.8 0.94

Footnotes:

  1. As at August  or September 2013 (data are quarterly for Sydney, Australia and New Zealand).
  2. 3 month interest rates, as at 26 October 2013.
  3. Weighted average of 8 capital cities, as at September quarter 2013.

Source: www.economist.com, Markets & data; ABS Cat. No. 6401.0. Consumer Price Index, Australia, September 2013