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Inflation Low (on average)

The release this week of the 2004 December quarter CPI shows Australian inflation staying low (0.8% for the quarter and 2.6% for the last year) as it has been now for the past 14 years averaging 2.3%pa. This is as a good as it gets for investment and is reflected in the stock market index (All Ords price index) averaging 8.6%pa over the same period and 6.3%pa ahead of CPI (before allowing for dividends which are an additional 3 to 4%pa).

Digging deeper in the average CPI increase over the 15 years for which we have price categories we find Health costs rose 4.8%pa and education 6.1%pa, both no doubt heavily dependent on wage costs which rose 1.7%pa faster than the CPI. What is a bit surprising is Housing shows 1.7%pa price rise compared to the median house price, which rose 7.1%pa over the same period. The CPI has been subject to a number of changes in the housing component including removal of mortgage costs and consumer credit charges in 1998.

Posted Wednesday, 26 January 2005

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