Inflation was likely to be close to the mid-range of the Reserve Bank's 0% to 3% at the end of June, figures due out tomorrow were expected to show.
Westpac chief economist Brendan O'Donovan is forecasting the consumer price index - the official measure of inflation - to be 1.7% at the end of the second quarter, down from 3% at the end of March.
Disinflation remained the theme of the year as the economic contraction created economic slack both at home and around the world, he said.
"For the current quarter, it is more about specific price changes rather than the general inflation environment."
Higher energy prices would help lift the index by 0.4% in the three months ended June.
The housing group was expected to make a strong contribution to the quarter, largely driven by higher electricity prices.
However, only modest inflation was anticipated in the rents, construction and property maintenance part of the housing group, Mr O'Donovan said.
The transport group was expected to make the strongest positive contribution to the second quarter inflation, driven largely by higher fuel prices. The overall group contribution would be dampened by expected falls in air fares and vehicle prices.
Non-tradeable inflation was expected to continue tracking down and was expected to post the smallest rise since 2001 because of lower house construction costs, domestic air fares and education prices.
Tradeable inflation would be held back by flat food prices.
Inflation followed the economic cycle so current inflation results had limited implications for policy, he said.
"That said, we are looking for clear signs that the economic recession is pulling down domestic inflation. We would see this as a precursor to a generally weak inflation period over the coming two years that ultimately allows the official cash rate to remain low for some time."
• At a glance
Disinflation: A drop in the inflation rate through a reduction in the rate at which prices rise.
Deflation: A decline in general price levels, often caused by a reduction in the supply of money or credit.
