The Australian Bureau of Statistics released the Consumer Price Index, Australia data for the March 2013 quarter today and while the inflation rate rose a little, this was mainly due to the fact that the base March-quarter 2012 was unusually low, thus distorting the annualised figure. When we continue the most plausible recent trends the annual inflation rate is below 2 per cent and falling. The Reserve Bank of Australia’s preferred core inflation measures – the Weighted Median and Trimmed Mean – are now well within the inflation targetting range and are probably trending down. This suggests that the RBA will probably consider the inflation outlook to be benign or “too low” and will instead have to shift their focus to the failing labour market, which in the last month showed signs of considerable deterioration after a flat 12-15 months. The inflation trend clearly contradicts the commentators who have been predicting the opposite on the basis of the (modest) rise in the budget deficit over the last few years as the downturn hit Australia. Their standing in the predictions stakes continues to be dented by the data. The evidence is suggesting that the economy is slowing under the weight of the federal government’s obsessive pursuit of a budget surplus. The benign inflation outlook provides plenty of room for further fiscal stimulus.