However, this has yet to have a meaningful impact on the rate of inflation and means a rise in interest rates is possibly still years away.

The Reserve Bank has repeatedly said it won't lift the cash rate - currently at a record low 0.1 per cent - until inflation is sustainably within its two to three per cent target band, something it has previously said won't happen until 2023.

Wednesday's consumer price index for the December quarter showed annual inflation was still a limp 0.9 per cent.

For the December quarter itself, inflation was also up by a slightly larger-than-expected 0.9 per cent.

This was primarily the result of an increase in tobacco excise and the introduction, continuation and conclusion of a number of government schemes.

The final unwinding of a free child care subsidy introduced during the depths of last year's recession led to a further 37.7 per cent jump in costs, but a 0.7 per cent rise in the cost of new homes would have been higher if not for government stimulus measures, like the $25,000 HomeBuilder grant.

Underlying measures of inflation - which smooth out wild price swings and are closely monitored by the Reserve Bank in terms of monetary policy - averaged an annual rate of 1.3 per cent.

"For inflation to lift to print sustainably within the two to three per cent target range, the (Reserve) Bank has said wages growth will need to lift to a three per cent-plus rate," National Australia Bank economist Tapas Strickland said.

"(This) will require a tight labour market and an unemployment rate to be 'four point something' per cent in the words of RBA Governor Lowe."

The unemployment rate was 6.6 per cent in December.

Still, employment is strengthening quicker than expected as business conditions rose to a two-year high, and in turn has seen consumer confidence return to a 14-month peak.

The Australian Bureau of Statistics will release its December quarter international trade price indexes on Thursday which measure the price changes of imports and exports.

Australian Associated Press