Australian families struggling with the high cost of living received a triple-barrelled reason for hope yesterday.
Economists predicted there could be two interest rate cuts before Christmas, the NRMA said petrol prices were on the way down and the consumer watchdog's review into grocery prices recommended a new pricing system to help find bargains at the supermarket.
But any optimism for the home-front comes as new data indicates the Australian economy continues to slow. Two surveys showed a sharp fall in business confidence in the June quarter and a contraction of the services sector in July.
Vehicle sales also fell by 2.7 per cent as the stockmarket reeled in the wake of heavy losses mostly in the resources sector and weaker commodity prices, with shares plunging to a 32-month low.
Despite the apparent slowing of the economy, Treasurer Wayne Swan said that any talk of a recession was ''absolutely unhelpful''. The Government had done everything it could to protect the country from the most difficult global conditions in 25 years and talk of possible recession would not help matters.
The Reserve Bank of Australia kept the official cash rate steady at 7.25 per cent for the fifth consecutive time after its monthly board meeting yesterday.
RBA governor Glenn Stevens said there was evidence that tight financial conditions, along with rising petrol prices and lower house prices, had restrained domestic demand.
''With demand slowing, the board's view is that scope to move towards a less restrictive stance on monetary policy in the period ahead is increasing,'' he said in a statement.
Financial markets are pricing in a quarter of a percentage point rate cut as early as the next board meeting in September, while ANZ senior economist Warren Hogan said he believed the first rate cut would be 0.25 percentage points in September followed by a similar cut a month or two later.
This will be a huge relief to many households struggling with current 12-year-high mortgage rates.
Hip-pocket relief also appears to be on the way at the bowser, with NRMA president Alan Evans saying unleaded petrol should fall within weeks to $1.20 a litre in the wake of crude oil prices dropping.
Australian Automobile Association executive director Mike Harris doesn't expect such a sharp drop but reckons current prices at the pump should come down another 10c a litre.
''If that doesn't happen we will be very loudly saying to the oil companies and the retailers, 'Why haven't you brought the price down?' '' Mr Harris said. ''And we would expect the ACCC to be asking a very similar question in a very public way.''
The global price of oil has dropped by $US25 a barrel in the past three weeks to $US120 a barrel. Unleaded petrol prices in Australia reflect the price of refined petrol in Singapore. Prices for unleaded in Canberra yesterday ranged from 146.9c (Mawson) and 150.9c (Gungahlin) to 153.9c (Braddon), without shopper docket discounts.
Following the Australian Competition and Consumer Commission's six-month inquiry into grocery prices, the Federal Government will now look at the best way of introducing unit pricing in which a price per kilogram, litre or unit is displayed for goods. Issuing its 642-page report into grocery prices yesterday, the ACCC also urged changes to some anti-competitive impacts of zoning and planning laws and to the Horticulture Act.
The ACCC said the entry of Aldi into the eastern states had had a ''dynamic effect'' on competition there but other parts of Australia suffered from little incentive for competition between the two big players.
Consumer group Choice welcomed the report and encouraged consumers to take advantage of the Government's new GROCERYchoice website at www.GROCERYchoice.gov.au.
'' There's no magic wand to cut grocery bills overnight but enhanced competition can put downwards pressure on prices,'' Choice spokesman Christopher Zinn said. ''In the short to medium term unit pricing will create greater price transparency. In the medium to long term, getting more entrants into the market will also help control prices.''
But Consumer Affairs Minister Chris Bowen said yesterday that despite the findings he could not guarantee grocery prices would go down. ''We will do everything possible to ensure the market is as vigorous as possible to ensure prices do go down,'' Mr Bowen said.
The Government would look at the best way of introducing unit pricing, but a number of issues needed to be looked at before it could be introduced, including the effect it might have on small businesses.
The report found there was not enough competition among supermarkets.
It found grocery retailing was ''workably competitive'', but restricted by factors such as limited incentives for price competition between the main players, Coles and Woolworths.
The inquiry report found the dominance of the industry by Coles and Woolworths was not the reason prices of fruit and vegetables, eggs, bread and cheese had risen between 17 per cent and 28 per cent in the past decade. Instead, the ACCC blamed international influences and natural disasters like droughts for forcing up prices.
Federal Opposition Leader Brendan Nelson said the review would do nothing for consumers and compared it with the Government's FuelWatch scheme, calling it a ''stunt''.