The principal medium-term objective for monetary policy is to control inflation, expressed as a target rate of consumer price inflation of between 2–3 per cent, on average, over the cycle. Since the adoption of inflation targeting in 1993, consumer price inflation in Australia has averaged close to 2½ per cent a year (Graph 1). This average, however, masks considerable variation in the pace of price growth of the various goods and services included in the Consumer Price Index (CPI), reflecting the varying underlying trends in productivity, input costs, margins and changes in government policy. This article documents and discusses these longer-run movements in relative prices, and the reasons behind them. In particular, it shows that over the past 16 years, the aggregate price of manufactured items has barely changed, while the price of services and food and beverage categories have tended to increase at an average annualised rate of around 3–4 per cent.
|Number of pages
|Reserve Bank of Australia. Bulletin
|Published - Jul 2009