Treasurer Wayne Swan says the latest benign inflation figures are a remarkable achievement when the economy is growing at an impressive rate.
The annual consumer price index (CPI) released on Wednesday was just 1.2 per cent in the 12 months to June, its lowest level in 13 years, and down from 1.6 per cent in the year to March.
This is well below the Reserve Bank's (RBA) two to three per cent inflation target band.
The Australian Bureau of Statistics said the CPI rose 0.5 per cent in the June quarter.
Underlying measures of inflation were equally benign.
"This is a remarkable achievement especially against the backdrop of impressive economic growth," Mr Swan told reporters in Sydney.
Mr Swan said Australia's economic fundamentals were "rock solid".
"These figures today give Australians reason to be optimistic, and Australians the reason to reject the doomsayers that constantly talk our economy down," he said.
The fundamentals were achieved during a period of heightened global uncertainty, as well as some difficult structural transition, which were impacting certain sectors of the economy.
"Contained inflation is also a dividend of the government's fiscal discipline, and has been vital to the recent interest rate cuts from the RBA," Mr Swan said.
The Reserve Bank of Australia cut the cash rate by 75 basis points during May and June.
But Mr Swan refused to speculate whether the central bank would cut the cash rate any further, saying the RBA made its decisions independently of government.
AAP