Low inflation Great for Not for Profits - CBA

This article is part of a regular series of articles by the Commonwealth Bank, who will be using their financial experts to provide news, insight and expert advice for Not for Profit organisations.

Two reports released last week – the Consumer Price Index and Import & Export Prices – provide good news for Not for Profits , says James McIntyre from the Commonwealth Bank.

The main measure of inflation in Australia – The Consumer Price Index (CPI) rose by just 0.4% in seasonally adjusted terms in the September quarter. And the average measure, which is the Reserve Bank’s preferred “underlying” measure of inflation, fell from 2.7 per cent to 2.4 per cent in annual terms. The lowest result in 7 years.

The ABS noted that the most significant price rises in the September quarter were electricity (+7.8%), international holidays and accommodation (+5.1 per cent), rents (+1.2%), water and sewage (+8.6 %) and property rates and charges (+5.2 %).

CBA’s James McIntyre says that whilst these increases will affect NFPs and their clients, there are significant price decreases in pharmaceutical products (-5.0%), audio (-3.3%), visual and computing equipment (-3.3%), automotive fuel (-1.4%), vegetables (-2.5%), motor vehicles (-1.0%) and fruit (-1.2%).

McIntyre believes these decreases are good news which will reduce the pain felt in many low socio-economic areas.

This good news was further highlighted in the import and export prices for the same period. Import prices for consumption goods were at the lowest levels in 19 years.

McIntyre says these record low prices should translate into good news for struggling families in the lead up to Christmas, with retailers not needing much coaxing to pass the savings on quicker than they have in the past.

Imported Goods Prices in the September Quarter 2011 were:

McIntyre considers this good news for NFPs on two fronts:

1. The NFP themselves will find the cost of many goods and services they provide lower than previous years and they will be able to use these savings to offset increases in overheads.
    
2. Many of the NFP customers themselves will also enjoy these savings and find they have more funds to meet other pressures in household budgets, such as higher utility costs.