Derek Rose
(Australian Associated Press)

Prices for consumer goods dropped by 1.9 per cent in the June quarter, the largest quarterly fall in the 72-year history of Australia’s Consumer Price Index.

Overall the annual inflation rate was a negative 0.3 per cent in the year to June, just the third time since 1949 that inflation has been negative, figures from the Australian Bureau of Statistics showed on Wednesday.

Australian has seen negative inflation in 1962 and 1997-98 previously.

The result was mainly the result of federal government’s nationwide emergency free child care policy, the free pre-school that was provided in NSW, Victoria and Queensland, as well as a 19.3 per cent slide in the price of petrol as oil prices collapsed during the coronavirus crisis.

“Excluding these three components, the CPI would have risen 0.1 per cent in the June quarter,” ABS chief economist Bruce Hockman said.

The data was largely in line with economists’ expectations for inflation to drop by around 2.0 per cent but still struck them as remarkable.

“An historic day,” said CommSec chief economist Craig James.

“The last time consumer prices fell by 1.9 per cent over a quarter – that is, over a three month period – was in 1931.

“Fortunately policymakers today have responded differently to back then, applying significant fiscal and monetary stimulus to limit the length and severity of the downturn. So prices are tipped to rebound in the current quarter,” he added.

There were, however, notable increases in the prices of certain goods.

The price of cleaning supplies rose 6.2 per cent, non-durable household good prices such as toilet paper increased 4.5 per cent, furniture prices rose 3.8 per cent, and household appliance prices increased by 3.0 per cent.

“High demand saw a reduction in specials and genuine price increases on a range of long-life products such as canned tuna and canned meat, rice and pasta,” the ABS said.

Rents also decreased by 1.3 per cent, a measure that captured all current rents including public housing, not just new rental contracts.

“We thought our forecast of negative 0.7 per cent was bold,” Westpac economist Justin Smirk wrote in reference to rent.

“We will have to see if we can determine the share of this fall is a real price adjustment and share that is just a COVID temporary adjustment.”

By 1323 AEST, the Australian dollar was buying 71.70 US cents after initially dropping to as low as 71.49 US cents following the inflation announcement. It is higher from 71.32 US cents at Tuesday’s close.