By business reporter Michael Janda
Updated Wed 23 Apr 2014
Photo: Petrol price rises were one of the biggest contributors to inflation. (ABC Radio)
Inflation has remained within the Reserve Bank's 2-3 per cent target, taking pressure off the RBA to consider early rate rises.
Economist forecasts had centred on a consumer price rise of 3.2 per cent in the year to the end of March, but the Bureau of Statistics figures show inflation was 2.9 per cent over that period.
Prices rose just 0.6 per cent in the quarter, below an expected 0.8 per cent, with much of the increase due to seasonal factors and volatile price movements.
Tobacco prices jumped 6.7 per cent in the March quarter, with an increase in excise.
Fuel prices rose 4.1 per cent as a short-lived dip in the Australian dollar combined with rising international petroleum prices to push the pump price higher.
Secondary (6 per cent) and tertiary (4.3 per cent) education both recorded strong seasonal rises, with fees lifted for the start of the new academic year.
Medical and hospital products rose 1.9 per cent and pharmaceutical goods increased 6.1 per cent, with the hike in drug prices largely due to seasonal factors related to the Federal Government's Pharmaceutical Benefits Scheme.
These price gains were partly offset by a 4.3 per cent fall in furniture prices, a 3.3 per cent decline in the cost of maintaining and repairing vehicles and 2.4 per cent falls in the cost of both domestic and international travel and accommodation.
That left the Reserve Bank's preferred measures of underlying inflation at 0.5 and 0.6 per cent for the quarter, or 2.6 or 2.7 per cent for the year to March, well within the 2-3 per cent target.
CommSec economist Savanth Sebastian says the data show that domestic prices (0.6 per cent) rose faster than the price of imported goods, despite a dip in the Australian dollar for much of the period.
"Policymakers would be more comforted by the deflationary aspect of prices for market-determined services, with prices falling 0.1 per cent in the quarter," he observed in a note on the figures.
"It seems to suggest that the slower and weaker wage growth (which has been part of the economic landscape for the past year) is finally filtering through to a fall in prices for services."
AMP Capital Investors chief economist Shane Oliver says this is likely to give the Reserve Bank breathing room to stay on the sidelines for many months.
"The bottom line is that inflation remains benign, there's no pressure on the Reserve Bank here to quickly raise interest rates," he told Reuters.
"I certainly don't think there's enough in this to see the Reserve Bank reinstate an easing bias. The Reserve Bank can sit quite comfortably on its neutral bias."
The Australian dollar slipped from 93.8 US cents to 93.03 by 11:52am (AEST), as currency traders agreed that inflation was well under control for now, and there would be no pressure on the Reserve Bank to lift interest rates for many months to come.
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