Reserve Bank responds to new pricing regime.

International retailers are increasingly putting downward pressure on prices in the Australian market, resulting in an ‘economy-altering structural change’.

The overseas retailers’ effect on the Reserve Bank of Australia's pricing models has been "profound", according to RBA assistant governor Luci Ellis.

Retail prices once rose in line with inflation rates, but over the last decade, prices have either fallen or remained flat.

"This is a big change in pricing behaviour for some important parts of the Consumer Price Index (CPI). The question of how long this shift will last has been a key issue for us as we compile our inflation forecasts," Ellis said.

Ellis said lower retail prices were an economy-altering "structural" change.

The CPI, a key indicator of inflation for the RBA, is heavily weighted towards retail pricing, tracking the price of food, clothing, homewares and alcohol among other things.

Australia's CPI increased by 0.6 per cent in the June quarter and 1.6 per cent over the preceding 12 months, continuing a long period of low inflation growth.

Low inflation leads to low prices, which are good for consumers but cut-throat for retailers, eroding

Australian Retail Association executive director Russell Zimmerman said that while international retailers have brought on lower prices for local retailers, the increase in competition is a boon for consumers.

While he acknowledges the competition is hard on retailers, he claims keeping international retailers out of Australia would have done "more harm than good".

"If those big international retailers weren't here, people would be buying from overseas, and that would be lost jobs to the industry," he said.