Inflation falls faster than expected, deepening expectations of RBA ...

Inflation in Australia is falling faster than expected, deepening expectations the Reserve Bank of Australia (RBA) will keep interest rates on hold when it meets next week.

New data from the Australian Bureau of Statistics (ABS) shows that in the 12 months to December, the consumer price index (CPI) rose to a two-year low of 4.1 per cent.

Financial markets had largely expected headline inflation to come in at 4.3 per cent.

Michelle Marquardt, ABS head of prices statistics, said the level of inflation in the country had fallen considerably since the peak in December 2022.

"The CPI rose 0.6 per cent in the December quarter, lower than the 1.2 per cent rise in the September 2023 quarter. This was the smallest quarterly rise since the March 2021 quarter," she said.

"While prices continued to rise for most goods and services, annual CPI inflation has fallen from a peak of 7.8 per cent in December 2022, to 4.1 per cent in December 2023."

The biggest contributors to the quarterly figure were housing (up 1 per cent), alcohol and tobacco (up 2.8 per cent) and food and beverages (up 0.5 per cent).