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Australian inflation showing signs of easing

For the 12 month period to March 2009, the Australian Bureau of Statistics (ABS) recorded a 2.5 percent inflation rate, which is a return to the Reserve Bank of Australia’s target band of 2-3 percent.

However, a noticeable downward trend was recorded as inflation reached 5 percent in the 12 months to September 2008, and 3.7 percent in the 12 month period to December 2008.

Rory McLeod, National Director of Research at Colliers International, said the results are expected to encourage the Federal Government to further boost the economy.

"This relatively low level of inflation means that the Reserve Bank of Australia can continue to lower interest rates without stimulating inflation."

For the housing market, the CPI found a 5.5 percent growth, which is a slower growth rate than the December 2008 quarter figure of 6.5 percent.

"The major contributor to the growth in housing costs was increasing rental levels which increased by 8.1 percent nationally," said Mr McLeod.

"However, the rate of increase in rentals is slowing as the First Home Owners Boost (FHOB) allows renters to move into the home owner market."

Loans to first home buyers increased to 27 percent of all loans in February 2009, up from 17 percent in February 2008, which was from 10,667 to 14,484.

"However this is primarily because of a reduction in the number of home loans to non-first home buyers which decreased by 23 percent over the period," said Mr McLeod.

Non-first home buyers make up three-quarters of all purchases and the decrease in the number of home loans to this market was from 50,856 to 39,302, which is an 11,554 drop compared to the previous 12 month period.

"It shows that the FHOB program is working but the lower interest rates are not increasing the number of loans to other buyers," he said.

"We believe that the growth in rentals will continue to slow as more renters become owners."

Below is a chart which shows the annual changes in rentals in Sydney, Melbourne and Brisbane.