Why is Australia's inflation rate low?

Inflation rate is the rate at which the value of your currency decreases measured against Consumer Price Index (normally measured on per annum equivalence); it has nothing to do with economic growth rate or the development status of an economy. The Consumer Price Index measurement depends on the "typical" goods that the people in the country purchased; and my guess is Indonesia's CPI will be more heavily weighted towards foods and basic necessities compared to Australia's. So if the price of food worldwide increases; the inflation rate in Indonesia will be affected more than Australia because of the statistical weighting (i.e. larger % of average indonesian salary is spent on food than % of average australian salary). Economic development is totally different matter. It is generally easier for developing nations to grow at faster rate than developed nations (in term of %) because the base is lower. e.g. China has been growing at around 8% per year while developed countries would be lucky to be growing at 2-3% a year. This growth rate is nothing to do with inflation; most of the growth rate is measured in "real" term instead of "nominal" term (i.e. if Australia's growth rate is 2%; it normally means 2% after inflation or 4.845% before inflation). Economic growth uses Gross Domestic Product (GDP) as measurement; and if I remember correctly - it calculates the aggregates demand (C+G+I+X-M) of the country. So basically the more people consume; the more government spend; the more people invest; and the higher net export of a country is; the larger its GDP. Frankly I think it is not a really valid measurement; but it is the way it is. So in very simple term: 1. Inflation rate is the decrease in value of your paper currency against price of goods and services 2. Economic development is measured by the total value of goods and services produced by a country; normally after removing inflation from account. 3. Inflation is normally the result of the government printing more money than the increase in the goods and services produced. This is not always 100% the case; but most of the time it is.