Australia's consumer prices fell by the most in more than 11 years as the economy stalled and fuel prices tumbled, giving the Reserve Bank more room to cut official interest rates.
The quarterly inflation rate dropped by 0.3pc in the fourth quarter of last year from an increase of 1.2pc in the third quarter, according to data released by the Australian Bureau of Statistics.
That takes the annual inflation rate down from 5pc, above the Reserve Bank's target inflation rate, to nearer 3.7pc.
Petrol led the price slide, plunging 18.2pc in the quarter as the cost of crude oil plummeted.
The lower CPI inflation reading is likely to provide the Reserve Bank more room to cut interest rates.
Until the middle of last year, the central bank's main worry had been inflation which it sought to quell by raising rates, only to switch course as global growth hit a wall.
Other figures out today add to the case for a big rate cut.
Skilled job vacancies fell 0.1pc in January from the previous month on a seasonally adjusted basis, and were 44.8pc lower than they were a year earlier.
The Westpac/Melbourne Institute index of economic activity, meanwhile, contracted by 2.2pc in November, the first negative readings since 2001 and were far below the long-run growth rate of 3.5pc.
''It's a fairly good inflation report,'' said RBC Capital Markets senior economist Su-Lin Ong.
''The headline number has fallen - not as much as expected - reflecting a drop in fuel prices in quarter.''
The December quarter CPI figures are the weakest since the September quarter of 1997.
Compared with a year earlier, consumer prices were 3.7pc higher, slightly more than the 3.6pc increase tipped by analysts.
The core measure, which strips out volatile fuel and food prices, also showed a modest increase, she said.
''I don't see anything in these numbers to stop the Reserve Bank from delivering another cut next month.''
The RBA lopped three percentage points from the interest rate in the final four months of 2008 to lower the rate to 4.25pc, and is poised to cut rates again in February.
A consensus of economists expects at least another 50 basis points of reductions when its board meets again on rates on February 3.
''The actual components of the CPI came in, in line with expectations,'' said JP Morgan economists Helen Kevans.
''We continue to see price rises in food, housing and holiday travel accommodation resulting from weakness of the Aussie dollar.
''We saw significant falls in transportation costs over the quarter owing to falls in petrol prices.''
Ms Kevans dismissed the possibility of deflation looming in the lower consumer price index numbers.
''We're going to see some very weak inflation data over the next few quarters," she said, adding it will take some time for CPI to fall back into the RBA's target band of 2-3pc.
Inflation won't affect monetary policy in the near term, Ms Kevans said, instead the central bank will focus on slumping demand from Australia's trade partners, particularly in Asia.
The Australian dollar initially gained after today's inflation numbers before easing back to about US66.55cents.
The currency neared parity with the US dollar in July before sinking about one-third, raising the cost of imported goods and services.
The Reserve Bank's own inflation gauges also reported a slowing in underlying inflation.
The RBA's trimmed mean inflation rate posted a 0.6pc increase for the quarter, compared with economists forecasts of an 0.8pc.
Year-on-year, the tally rose 4.2pc, versus forecasts of 4.4pc.
The RBA's weighted median inflation measure, meanwhile, reported a 0.9pc increase from the previous quarter, versus 0.8pc forecasted.
On a year-on-year basis, the gauge rose 4.5pc, against consensus forecasts of a 4.4pc rise.
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