7 2. 3 −0. 8 −0. 1 1. 1 1. 6 −0. 5 avc and telecommunications equipment −2. 8 −4. 7 housing ( d ) 3. 0 1. 9 3. 5 2. 9 2. 2 2. 8 0. 7 2. 2 administered prices 4. 4 3. 8 utilities education health other administered 4. 5 5. 1 4. 3 4. 0 4. 2 3. 2 4. 0 3. 6 market services ( e ) 2. 9 2. 0 tobacco 8. 4 13. 9 automotive fuel 3. 3 6. 7 holiday travel and accommodation 2. 2 0. 8 headline cpi ( f ) 2. 5 1. 8 trimmed mean ( f ) 2. 6 1. 8 retail consumer durables ( b ) food ( c ) fruit and vegetables alcoholic drinks non - alcoholic drinks new dwelling purchase rents dwelling maintenance and repair ( a ) adjusted for the tax changes of 1999 - 2000 ( b ) excludes audio, visual and computing equipment ( c ) excludes fruit, vegetables, meals out and takeaway food ( d ) excludes administered prices ( e ) excludes domestic travel and telecommunications equipment and services ( f ) excludes interest charges and indirect deposit and loan facilities sources : abs ; rba http : / / www. rba. gov. au / speeches / 2018 / sp - dg - 2018 - 08 - 22. html 4 / 23 22 / 08 / 2018 low inflation | speeches | rba retail one of the factors having a significant impact on inflation outcomes in recent years has been increased competition in the retail sector. prices of many retail items have been steady or falling over recent years. since 2015, retail prices have on average. the price of the typical food basket declined has not increased all that much over the past 10 years, while the prices of consumer durable items such as fridges and furniture ( adjusted for improvements in the quality of the goods ) have not changed noticeably over the past 25 years ( graph 3 ). most notably, the prices of audiovisual equipment have declined by 90 per cent over the past 25 years ( see below ). in the case of consumer durables and audiovisual equipment, technological improvement has clearly been an important factor, but competition in the retail sector has also played a significant role. graph 3 one way of illustrating the effect of competition on retail prices is by examining the changing dynamics of exchange rate pass - through. that is

, the way that changes in the exchange rate affect price changes for retail items. http : / / www. rba. gov. au / speeches / 2018 / sp - dg - 2018 - 08 - 22. html 5 / 23 22 / 08 / 2018 low inflation | speeches | rba graph 4 illustrates that changes in the exchange rate typically pass through quickly to import prices for retail goods. that is, the prices of imported goods at the docks tend to move very much in line with movements in the exchange rate ( first - stage pass - through ). when the exchange rate depreciates, these at - the - dock prices increase. this relationship hasn't changed much over the past 25 years. in the two decades up to 2010, these changes in import prices at the docks tended to be passed on to the retail prices faced by consumers. however, over the past decade or so there has been a shift in these pricing dynamics for retail goods. graph 4 while slower growth in consumer spending over this time frame compared with the earlier period has probably played a role in explaining retailers'reluctance to pass on higher import prices, it is the http : / / www. rba. gov. au / speeches / 2018 / sp - dg - 2018 - 08 - 22. html 6 / 23 22 / 08 / 2018 low inflation | speeches | rba structural changes underway in the retail sector that are putting downward pressure on prices. one aspect of this is that the internet, and technology more generally, have meant that foreign retailers can now compete with local retailers for online shopping, which is a small but rapidly growing part of the retail market. in june, online sales made up around 5 per cent of total retail trade according to the australian bureau of statistics ( abs ) ; however, the value of online sales has grown by 50 per cent over the past year. this competitive pressure is not confined to online market share, with a number of large foreign retailers also setting up ‘ bricks and mortar ’ retail operations in australia. in addition to the direct competition from this source, there is also greater information about prices, which has allowed households to comparison - shop more easily and negotiate greater discounts off listed prices. competition is not directly observable, but we can look at some proxies for it to assess how it has changed. two proxies for competition are mark - ups and margins. mark - ups measure the ratio of a firm's sale price to its marginal cost