Australia inflation jumps back to 4% as oil prices sharpen pressure on RBA
?s inflation fight just got harder. Fresh consumer price data showed annual headline inflation jumped back to 4% in August, a day after the Reserve
Australia’s inflation fight just got harder. Fresh consumer price data showed annual headline inflation jumped back to 4% in August, a day after the Reserve Bank of Australia lifted rates to a 15-year high of 4.6%.
The latest figures point to a central bank under fresh pressure as fuel costs feed through the economy and the RBA weighs whether one rate rise was enough.
Trimmed mean stays too hot
The Australian Bureau of Statistics said the consumer price index rose 0.4% in August, lifting annual headline inflation from 3.5% in July to 4% over the 12 months to August. The move came as higher oil prices continued to work their way through household budgets.
Just as important for policymakers, the trimmed mean — the RBA’s preferred measure of underlying inflation — held at 3.6% for a third straight month. That reading strips out the most volatile items, including fuel, and has stayed well above the central bank’s 2%-3% target band.
Economists say that matters. A higher headline rate can be explained by a jump in oil prices, but the stubborn trimmed mean suggests broader price pressure is still running through the economy.
Housing still leads the surge
Housing was the biggest contributor to annual inflation, rising 5.7% in August, according to ABS head of price statistics Rachael McCririck. She said the increase reflected higher costs for both new dwellings and electricity.
New dwelling prices climbed 5.4% over the year as builders passed on higher material and labour costs. Transport was the second-largest driver, a category that has been heavily influenced by fuel.
The data land at a delicate moment for the RBA, which raised the cash rate on Tuesday to 4.60% after what had already become a long stretch of tight policy. Markets and economists are now watching for signs the bank could move again in coming weeks.
More rate pain possible
Deloitte Access Economics partner Stephen Smith said the inflation figures could shorten the odds of another increase on Melbourne Cup Day, leaving Australian households facing a rougher run.
“Inflation in Australia is broadbased, persistent and well above the 2-3 per cent target band,” he said.
For now, the combination of firmer fuel prices, sticky underlying inflation and rising housing costs gives the RBA little comfort. The next question is whether the central bank decides one hike in a week was not enough.
