Inflation eases back more than expected in May, falling to 2.1%

ABC NEWS (Australia)

The case for the Reserve Bank to again lower interest rates just got a little stronger after inflation figures for May came in lower than expected. Cost pressures across the economy are easing and fears of an inflation shock caused by the war in the middle east are also subsiding following the fragile truce.

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00:00The boss of this transport company is keeping a close eye on developments in the Middle East,

00:07which is causing oil prices to fluctuate.

00:10When the fuel goes up, the price of goods in stores goes up because the fuel levy has

00:17to be added to the cost of getting the products to the store.

00:23Price volatility isn't showing up in official figures yet.

00:27Oil actually fell 2.9 per cent last month and 10 per cent for the year, helping to put downward

00:33pressure on inflation, which came in lower than expected at 2.1 per cent for the 12 months

00:38to May.

00:39Food, non-alcoholic drinks, rent hikes and construction cost pressures eased, but gas prices accelerated

00:47while electricity bills went backwards.

00:50Inflation is now at the bottom of the Reserve Bank's target range in what is now a sustained

00:57way.

00:58A price war on home brand products in supermarkets is underway, according to JP Morgan.

01:04And Choice found a basket of 14 items was slightly cheaper at Aldi than Woolworths and Coles, but

01:10a lot more expensive at IGA.

01:12I do find Aldi are a lot cheaper, but sometimes they just don't have the same things that Coles

01:19and Woolworths do have.

01:20Some relief could be on the way for households with financial markets pricing in more than

01:25a 90 per cent chance of an interest rate cut when the Reserve Bank meets next month.

01:30That probably means that they will cut in July, follow up with another one in August and most

01:34likely deliver a third cut this year in November.

01:39In time for when many households might need it most.

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