The Reserve Bank has scope to cut interest rates at its upcoming meeting after new inflation figures came in lower than expected.
The Australian Bureau of Statistics reported this morning that the consumer price index lifted by 0.5 per cent in the June quarter to be 1.2 per cent higher over the past 12 months.
It is the lowest annual inflation rate in 13 years.
On the keenly watched measures of underlying inflation, prices rose by a little over 0.5 per cent for an annual rate of 1.9 per cent. It is the lowest underlying inflation measure this century.
Prices for medical and hospital services lifted by 2.8 per cent through the quarter, rents jumped by 1.1 per cent, vegetables increased by 5.2 per cent while furniture costs rose by 4.5 per cent.
They were offset by a four per cent drop in domestic holiday, travel and accommodation costs, a 3.8 per cent fall in audio, visual and computing equipment while sweet tooths benefited from a 3.8 per cent decline in cakes and biscuits.
Through the year, education costs have risen by the most, up by 6.1 per cent.
However, food prices have dropped by 3.2 per cent while recreation and culture prices have ebbed by 0.6 per cent. Communication costs have increased by just 0.9 per cent.
In Perth, prices rose by 0.5 per cent in the quarter but were up by just 1.1 per cent for the full year.
Analysts had been expecting a quarterly inflation increase of about 0.6 per cent.
The Reserve Bank board next meets on August 7.