Australia slips into deflation after CPI suffers biggest quarterly loss in 72 years

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9 News – Stuart Marsh

Published: July 29th, 2020

Difficulty rating

Rating: 2 out of 5.

Credibility rating

Rating: 4 out of 5.

Preview

This article talks about Australia’s consumer price index (CPI) falling to 1.9% in June 2020 quarter, this is the biggest plunge since Australia started tracking CPI. Due to this decrease Australia is in deflation for the third time since 1949. The article poses the question of whether deflation is a good thing given that many economists will argue that a small level of inflation is good for the economy. The deflation is mostly due to decrease in childcare costs(due to government initiatives) and decrease in petrol costs(due to oil prices). The article suggests that your day-to-day financial health would determine whether you should be worried about the deflation.

Author

  • The author has a Bachelor of Media and Communications degree from the University of New South Wales.
  • The author has covered economics and other disciplines for half a decade.

Analysis of Potential Bias

  • Data is obtained from Australian Bureau of Statistics(ABS) which is Australia’s national statistical agency providing trusted official statistics on a wide range of economic, social, population and environmental matters.
  • The author quotes Chief Economist of ABS, but only to comment on the CPI.
  • There are no other experts to back up some of the author’s claims.

Article Decryption

CPI is the most widely used measure of consumer price inflation and can also measure deflation. The author poses the question of whether deflation is good or bad; on face value deflation is good for consumers because they can buy more goods and services with the same nominal income over time. However, it harms borrowers because they are paying their debts with money that is worth more than the money they borrowed. The author is right in that day-to-day financial health matters, deflation often leads to a contraction in the supply of money and credit so, having large cash reserves and little debt is better when in deflation.

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