The newly-elected conservative Australian government has resumed office with further calls for public spending cuts. Today’s Australian Bureau of Statistics inflation data should disabuse them of this idea. The Australian Bureau of Statistics released the Consumer Price Index, Australia – data for the June-quarter 2016 today and showed that the June-quarter inflation rate was 0.4 per cent (-0.2 per cent) with an annual inflation rate of 1.0 per cent (down from 1.3 per cent last quarter). The headline inflation rate has been below the Reserve Bank of Australia’s lower target bound of 2 per cent for nearly two years now. Clearly, within their own logic where an inflation rate within the 2 to 3 per cent band reflects successful monetary policy, the RBA is failing. The RBA’s preferred core inflation measures – the Weighted Median and Trimmed Mean – are also now below the lower target bound and are trending sharply downwards. Various measures of inflationary expectations are also falling quite sharply, including the longer-term, market-based forecasts. With the labour market data demonstrating weakness and the economy stuck in this low inflation malaise, it is clearly time for a change in policy direction. I won’t hold my breath!