Treasurer Wayne Swan says Australian households are still doing it tough, despite encouraging news on inflation.
Australian Bureau of Statistics figures issued today show inflationary pressures in the economy eased in the third quarter, opening the way for an interest rate cut when the Reserve Bank of Australia holds its Melbourne Cup Day board meeting next Tuesday.
"Today's result is encouraging, but we know we have many households still doing it tough," Mr Swan told reporters in Melbourne.
The consumer price index rose by 0.6 per cent in the September quarter, for an annual rate of 3.5 per cent.
The average of the RBA's trimmed mean and weighted median inflation measures was a 0.3 per cent rise in the quarter for an annual rate of 2.45 per cent.
But both annual outcomes were lower than the previous quarter.
"It's encouraging to see underlying inflation has fallen," Mr Swan said.
"That's one of the lowest quarterly figures in over a decade."
Mr Swan said health and petrol prices had declined by one per cent over the quarter.
But housing prices rose by 1.9 per cent, contributing to the overall inflation rise.
As well, higher utility bills were putting additional pressure on family budgets.
"Today's results also reflect the fact fruit prices are unwinding more slowly than previously expected in the aftermath of last summer's disasters," Mr Swan said.
However, the fundamentals of the economy were strong.
"Despite all of this, today's figures shine another light on the very strong fundamentals of our economy, the strong fundamentals of our economy that set us apart from the rest of the world," Mr Swan said.
"Most are facing the worst possible combination of slowing growth, high unemployment and rising inflation.
"Our situation couldn't be more different."
Mr Swan warned the economy still faced some difficult challenges.
"We do have our challenges, particularly the challenges which will flow from events in Europe and the United States, and they will add to pressure on our economy and also on our budget."
Mr Swan declined to comment on the outlook for interest rates.
