A nationwide Barbenheimer splurge has failed to derail a sustained decline in the pace of inflation that could signal an end to interest rate hikes.
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While ANZ transaction data showed a 75 per cent spike in cinema spending following the premiere of Barbie and Oppenheimer late last week, official figures confirm that price pressures have continued to ease.
Headline inflation rose by 0.8 per cent in the March quarter to reach an annual rate of 6 per cent, 1 percentage point down on the March quarter result and far below the peak of 7.8 per cent reached late last year.
The unexpectedly soft and broad-based result has encouraged speculation that interest rates are near their peak, if they are not there already.
Many economists expect the central bank board to hold monetary policy steady for a second month when it meets on Tuesday, while others predict an August 1 rate rise to be the last in the current tightening cycle.
The June quarter increase was the smallest rise in inflation in almost two years. Cheaper petrol and falling domestic travel and education costs were outweighed by rising rents, costlier food and the increasing expense of international holidays.
Treasurer Jim Chalmers said the moderation in inflation was "pleasing".
"We are making progress in this fight against inflation ... but [it] still will be higher than we'd like for longer than we'd like. Inflation remains our number one challenge," Dr Chalmers said.
"We know that Australians are still under the pump".
Opposition treasury spokesman Angus Taylor said households were feeling "real pain".
"The test for the government is whether they are going to be fighting inflation as a priority," Mr Taylor said. He accused it was making the inflation problem worse with its spending.
But the Reserve Bank of Australia is likely to pay closer attention to the cost of services, which rose to an annual rate of 6.3 per cent - their highest mark since 2001.
Services inflation is considered to be "stickier" than that for goods, largely because services are much more labour intensive and are less exposed to international competition. Soaring rents, which jumped 2.5 per cent (the biggest quarterly increase since 1988) were a major contributor to higher services costs, along with restaurant meals, childcare and insurance.
But households benefited from cheaper prices for communication services and equipment, lower education expenses and a substantial 7.2 per cent fall in the cost of domestic travel, including airfares.
EY chief economist Cherelle Murphy said the inflation update provided "cause for optimism".
While the price of services grew faster than that for goods for the first time in almost two years, Ms Murphy said its quarterly pace was slowing, from 2.1 per cent in the December quarter to 0.8 per cent last quarter.
The economist said a similar slowdown in the cost of non-tradable (domestically generated) inflation was also encouraging.
"The slowing in the quarterly rates of price growth eases pressure on the Reserve Bank to raise rates again in August, with the data suggesting that its dozen rate hikes since May 2022 are working as planned," Ms Murphy said.
The risk of inflation remaining too high for too long is fading, she said.
Deloitte Access Economics partner Stephen Smith went further, declaring the data as further evidence that the RBA had "increased interest rates too far".
Mr Smith said the central bank's rate hikes had been "ineffective" in controlling inflation because it had mostly been driven by supply factors, not demand.
"Inflation has fallen as a result of repairs to global supply chains and an easing of import prices," he said, and criticised the central bank's "narrow, dogmatic view" of the link between unemployment and inflation.
Innes Willox, chief executive of employer organisation Ai Group said it was "difficult to see anything other than positive news in [the] inflation data".
"The lower than expected annual rate of increase in inflation ... should give some cause for hope that we are on track for a soft landing that retains as many of the recent gains in employment as possible," Mr Willox said.
The inflation update follows a small improvement in prospects for the global economy.
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The International Monetary Fund expects world output to grow by 3 per cent this year and in 2024, which is a modest 0.2 of a percentage point improvement from forecasts issued three months ago.
While concerted action by central banks to fight inflation by raising interest rates is weighing heavily on growth, the resolution of the US debt ceiling standoff and the success of action to contain the fallout from bank failures in the US and Switzerland had reduced the risks to the global economy.
Despite the improvement, the IMF warned that the "balance of risks to global growth remains tilted to the downside".