Rising cost of fruit and vegetables drives up inflation

THE rising cost of fruit and vegetables drove up inflation Australia's inflation rate 0.7% during the December quarter, a Westpac forecast shows.

The forecast of inflation from the last quarter of last year comes before official estimates, but is a reliable indicator of the likely direction of the economy.

It said a "larger than seasonal rise in fruit" and forecast an unseasonable rise in vegetables during the December quarter 2013, a period vegetable costs normally fall.

"Together, fruit and vegetables explain almost half of the projected increase in the headline CPI," the report reads.

Offsetting the rise, though, were smaller falls across the cost of medical and pharmaceutical services and products, children's footwear, tableware and international travel.

The December quarter also saw a marked rise in the price of petrol, on the back of falls in the Australian dollar.