Economists say another cut to interest rates is a "done deal" after official data showed inflation was continuing to slow.
Data released by the Australian Bureau of Statistics today showed the consumer price index (CPI), the key measure of inflation used by the Reserve Bank of Australia (RBA), remained unchanged in the December quarter.
That brought the annual rate of inflation down to 3.1 per cent, from 3.5 per cent previously.
Economists' forecasts for the headline CPI had centred on a rise of 0.2 per cent in the quarter, for an annual pace of 3.3 per cent.
The data also showed seasonally-adjusted CPI rose 0.2 per cent in the December quarter while the trimmed mean CPI rose 0.6 per cent and the weighted median CPI rose 0.5 per cent over the same period.
Commsec economist Savanth Sebastian said the weaker-than-expected figures added to the case for the RBA to cut the official interest rate again in February.
The RBA cut the rate by 25 percentage points in November and again, by the same amount, in December.
"I think it is a done deal now that the Reserve Bank will cut rates," he said.
"The Australian economy has been quite sluggish, global growth forecasts have been cut and I think the Reserve Bank will take out a little bit more insurance in these volatile times."
Commonwealth Bank chief currency strategist Richard Grace agreed the steady CPI cleared the way for the RBA to cut the interest rate in February,.
"There's no hindrance for the RBA to cut rates from an inflation point of view because inflation is coming down," he said.
"It's pretty close to the middle of the RBA's inflation target band" of two to three per cent.
"It suggests that the RBA can cut rates if they want to."
Mr Grace said clothing, footwear and non-alcoholic beverages were the categories that declined in the quarter.
Fruit, pharmaceuticals, audio visual equipment and international holiday travel and motor vehicles were relatively flat while there were gains in domestic holiday travel and accommodation, rent, telecommunication equipment and beer.
"In the grand scheme of things, it's pretty similar to what we anticipated," Mr Grace said.
"The underlying measures were slightly firmer than we expected but only by one tenth of a per cent.
"I don't think it would have any effect on the exchange rate."
Macquarie senior economist Brian Redican said he believed there was no reason for the RBA to hold off on a rate cut, given the indications of a well-contained inflation rate.
"I don't think the Reserve Bank will be surprised by these numbers," he said.
"With inflation this well-contained, they can take out more insurance about the weakening global outlook, they can be more worried about those soft employment numbers."
Mr Redican said the domestic economy's performance would continue to be an important factor for the central bank in its rate cut decision.
"We have seen the Australian dollar re-strengthen over the last month, and that's putting more pressure on areas like manufacturing, so I think the rationale for the RBA will be to help support the domestic economy."
