The consumers price index showed a surprising 0.3% fall in the December quarter. Drops in food and communication prices led the index’s fall, but even if these items are excluded, the CPI would only have risen 0.2% in the quarter. With inflation contained, we don’t expect the Reserve Bank to begin looking at increasing the official cash rate until the beginning of 2013 as it seeks to support the economy while the turmoil in Europe clouds the outlook.

The Reserve Bank left the official cash rate on hold at 2.5% today. The Bank pointed to a myriad of factors that have either improved or deteriorated since December, but overall the Bank's outlook for interest rates appears to be relatively unchanged.

The consumers price index fell 0.3% in the December quarter, primarily on the back of a sharp drop in vegetable prices and lower costs for telecommunication services. Even if we ignored these declines, underlying price growth is very weak – implying that the Reserve Bank will feel under no pressure to increase interest rates before the later stages of the year.

Total car sales are 30% below where they were four years ago before the Global Financial Crisis.  We investigate whether car sales will return to their former level within the foreseeable future.

Total car sales during the first quarter of 2009 were down 40% from a year earlier, representing a difficult time for anyone trying to make a living in the automotive industry.  But the question on many people’s minds is whether car sales will regain their former glory once the economy improves.  This article provides five-year estimates for the three drivers of car sales – replacement demand, ownership rate, and household formation.  Car sales appear to be well below fundamentals at present, and are poised to rise significantly when the economy improves.

A graphical summary of recent trends in transport activity.