The official inflation figure has come in lower than expected, raising the prospect of further interest rate cuts.
The Bureau of Statistics Consumer Price Index (CPI) for the December quarter rose 0.2 per cent, leaving annual inflation for last year running at 2.2 per cent.
Prices had risen 1.4 per cent in the September quarter, meaning inflation was decelerating into the end of the year.
Economists' forecasts in a poll by Reuters had centred on an inflation reading of 0.4 per cent for the December quarter and 2.4 per cent for the year.
The Reserve Bank's preferred measures of underlying inflation - which remove the most volatile price movements - also came in below expectations.
The weighted median came in at 0.5 per cent for the quarter, while the trimmed mean was 0.6 per cent.
Both underlying inflation measures had consumer price rises in the bottom half of the RBA's 2-3 per cent target range, at 2.3 per cent for the year.
The Australian dollar eased slightly on the data from 105.6 to 105.45 US cents by 11:38am (AEDT) as investors increased their bets on more rate cuts from the RBA.
However, Macquarie's senior economist, Brian Redican, who is tipping a 2 per cent official cash rate by the end of the year, says the data probably is not quite weak enough to prompt a February cut.
"Certainly it makes it easier for the RBA to cut rates and it suggests they will be revising down some of their inflation forecasts," he told Reuters.
"There's probably a 35 to 40 per cent chance of a February rate cut, so not enough to get it over the line, but certainly we think the prospects of a March rate cut are very real." 'Little' carbon tax effect The Bureau of Statistics says the most significant price rises in the December quarter were for domestic travel and accommodation (which rose 6.2 per cent, but tends to rise in the lead-up to Christmas), automotive fuel (up 2.6 per cent) and rents (up 0.8 per cent).
Offsetting those rises were a 5.7 per cent slide in vegetable prices, a 4.3 per cent fall in audio, visual and computing equipment, and a 3.5 per cent decline in the price of pharmaceutical products.
TD Securities strategist Alvin Pontoh says the carbon tax does not appear to have had as much of an impact outside energy prices as Treasury had been forecasting, possibly because businesses are absorbing cost increases due to weak consumer demand.
"The carbon tax impact is not estimated by the ABS.
However, this tame inflation report contains little or no evidence of any indirect pass through from the introduction of the carbon tax in July," he observed in a note on the data.
"Previously, Treasury had estimated that it would add 0.7 per cent to headline CPI in 2012-13 and the RBA assumed that the indirect pass-through 'occurs over three quarters'." Darwin had the lowest rate of inflation, with no price rise in the quarter, while Sydney recorded a modest 0.1 per cent CPI increase.
Brisbane and Perth had 0.3 per cent price increases, while all the other capitals had a 0.4 per cent CPI rise.
However, Sydney and Darwin had the largest price rises over the past year, at 2.5 per cent, while Hobart's 1 per cent CPI increase was by far the smallest.