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Inflation in Australia is negative – MarketWatch



SYDNEY – For the first time in 22 years, annual inflation in Australia turned negative in the second quarter of the pandemic, as government childcare subsidies and lower oil prices caused the biggest quarterly decline.

The consumer price index in the country for the three months to June 30 fell by 1.9%, according to the official statistics bureau of Australia. Annual inflation fell to minus 0.3% from 2.2% three months earlier.

The ABS said the government’s ban on childcare free of charge since April 6, as part of its response to the economic blow from the coronavirus, was the biggest driver of Australia̵

7;s first annual declaration since March 1998.

The largest decline in prices in the sector was due to an 11% drop in household content and services, which included a 95% reduction in childcare costs through subsidies.

Fuel prices in the quarter fell by 19%, while the fall in education spending was also significant.

ABS chief economist Bruce Hawkman said the overall CPI would have risen 0.1% for the quarter without these three factors.

The cost of food and soft drinks increased by 0.5% as sellers reduced discounts as demand for long-lived items such as canned food and dried goods increased.

Reimbursement is likely in the third quarter, when the childcare subsidy scheme expires on July 12.

In 72 years of records, Australia has conducted annual deflation in only two previous cases, in 1962 and 1997-98.

Email Stuart Condi at stuart.condie@wsj.com


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