The headline consumer price index rose by 0.5% in Q4, lower than 0.7% seen in Q3 and expected for the last quarter as well.
A rise in petrol prices has sent inflation to the highest level in more than two years. The combination of currency strength and continued low inflation will keep the possibility of a further RBA rate cut on the table, although the RBA now remains comfortable to leave its policy stance unchanged limiting downside risk for the Aussie in the near-term. The strengthening global growth outlook is a positive for Australia's economy, although the accompanying strengthening of the Aussie is less desirable for the RBA who are now confronting uncomfortably low inflation.
"A February rate cut looks unlikely at this stage - the labour market is holding up and the RBA may want to monitor the recent uptick in investor loan growth because of the risk to financial stability".
Underlying inflation, which strips out the effects of volatile price movements, is forecast to have been 0.5 per cent in the quarter and 1.5 per cent over the year.
Venus Williams advances to quarterfinals of Australian Open
Venus Williams reached the quarter-finals thanks to her win over Mona Barthel 6/3 7/5. "She makes the court feel very very small". The 35-year-old Williams who had a breeze against the 23-year-old, will now meet No. 16 seed Barbora Strycova .
The December inflation quarter data will be released on Wednesday by the Australian Bureau of Statistics.
Wednesday's data showed inflation was fuelled by a 6.7 per cent increase in petrol prices in the quarter and a 7.4 per cent jump in tobacco prices as a result of an increase in excise. These rises are partially offset by falls in furnishings, household equipment and services (-0.8%) and communication (-0.8%).
Local body rates rose 0.2% in the quarter for an annual increase of 3.2%, while rubbish collection and recycling prices were up 2.5% in the three-month period and 5.2% in the year. Offsetting these rises are price falls for salad vegetables, tomatoes, lettuce and celery.
Vegetable prices have risen 12.5 per cent through the year to December quarter 2016.