A strong Australian dollar pushed first-quarter import prices to the lowest level in almost seven years, data on Friday showed.
The Australian Bureau of Statistics (ABS) said its import prices index fell 4.1 percent in the March quarter, to be 14.6 percent lower than the March quarter of 2003.
"The decrease was predominantly driven by the appreciation of the Australian dollar against most major currencies," ABS said. Import prices were at their lowest since the June quarter 1997.
There were price declines for most commodities, with machinery and transport equipment, miscellaneous manufactured articles, and petroleum and related products being the major contributors, the report said.
"There were no significant offsetting price increases," it added.
The Aussie touched a seven-year high of 80.05 US cents in mid-February after building on its 34 percent rally over 2003. It has subsequently pulled back and was trading at around 73.25 cents on Friday, showing little reaction to the data.
"Despite the recent fall in the local unit, the lagged effects of currency appreciation suggest muted import prices for some time," said Su-Lin Ong, senior economist at RBC.
The data will show a sharp divergence between tradable and non-tradable inflation in next Wednesday's first-quarter consumer prices index, she said.
"There is a possibility that the tradable component will register outright deflation in Q1. Currency strength has been a key factor in tempering overall prices and the odds are that total CPI will print sub-two percent next week, below the floor for the RBA's 2-3 percent target range," Ong said.
The ABS said its export prices index was flat in the first quarter following four consecutive quarters of negative movement. It said this was due to increases in a number of world commodity prices, offset by the appreciation of the local dollar.
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