Commsec economist Savanth Sebastian said the weaker than expected figures added to the case for the RBA to cut the cash rate in February. "I think it is a done deal now that the Reserve Bank will cut rates.
"The Australian economy has been quite sluggish, global growth forecasts have been cut and I think the Reserve Bank will take out a little bit more insurance in these volatile times."
The RBA cut the cash rate by a quarter of a percentage point in November and by the same amount in December.
Commonwealth Bank chief currency strategist Richard Grace said that as the CPI was in the middle of the RBA's target band of 2 to 3 per cent annual inflation, there was no reason for the central bank to keep rates on hold.
Grace noted that clothing, footwear and non-alcoholic beverages were the categories that declined in the quarter.
Fruit, pharmaceuticals, audio-visual equipment and international holiday travel and motor vehicles were relatively flat while there were gains in domestic holiday travel and accommodation, rent, telecommunication equipment and beer.
St George Bank chief economist Besa Deda said that relatively contained underlying inflation would be dwarfed by global concerns when the RBA board made its rates decision on February 7. "We saw further evidence of the darker global growth outlook from the confirmation that the IMF has downgraded the world outlook."
- AAP
