RBA Deputy Governor Guy Debelle discussed “Low Inflation” in a speech today. In short, he attributed low inflation to “include increased competition in the retail sector, historically low rental growth, the slow pace of wages growth and developments in some administered prices”. Utility prices boosted inflation for “a number of years” but are expected to reduce in the period ahead.
Debelle reiterated RBA’s forecast of a temporarily slow down in inflation in Q3. But beyond the September quarter, “we continue to expect inflation to be around 2¼ per cent over the next couple of years as above-trend GDP growth reduces spare capacity in the labour market and there is an associated pick-up in wages growth.” Most of the others forces are expected to abut even though “there is uncertainty about how much longer they will persist”.
