Australia’s Inflation Rate Rises to 4.3%, Rate Hike Looms
's headline inflation accelerated to 4.3%, with the Reserve Bank's preferred underlying gauge at 3.6%. Most economists expect another cash rate increase on…
Australia's inflation rate rises to 4.3%, according to figures released Wednesday by the Australian Bureau of Statistics, sharpening expectations of another interest rate increase next week.
The Reserve Bank of Australia's preferred gauge, underlying inflation, came in at an annual 3.6% to September. The central bank targets 2.5%.
Rate decision due November 3
The data lands shortly before the RBA's next monetary policy decision on November 3. Most economists are tipping another cash rate increase.
The cash rate, which informs lending rates including mortgages, already stands at 4.6%. That is its highest level in 15 years, after four rate hikes in 2026. RBA officials have strongly indicated the board may need to lift borrowing costs further, citing concerns of a "materially worse" inflation outlook.
RBA deputy governor Andrew Hauser told Senate estimates on Wednesday, shortly after the release, that the numbers were "too high". He said there was a "nightmare" risk that longer-term inflation expectations would pick up, making it harder to get inflation out of the system.
"We don't think it is necessarily crystallising yet, but it is a particular risk," Hauser said.
Fuel, housing and food all climb
Transport costs rose 8.7% over the past 12 months, driven in large part by escalating fuel prices stemming from the US and Israel conflict with Iran. Food prices jumped another 3.2% in a year. Housing costs were up 5.2%.
Housing is the single biggest category in the consumer price index, and the ABS said it was the largest contributor to annual inflation, followed by transport. Builders have been passing on higher costs for materials and labor for new dwellings, while electricity prices are also elevated.
For households, the squeeze is arriving as unemployment lifts. Mortgage holders are exposed most directly, because lending rates track the cash rate.
Political fight over the cause
A fierce political debate has erupted over what is driving the cost-of-living squeeze. Critics point to a mix of high fuel prices caused by the Iran conflict, government spending and poor productivity.
Treasurer Jim Chalmers said the government accepts "our part in the fight against inflation", but argued high oil prices and a recovering private sector were the main causes.
"The most important thing that can happen for Australians under pressure is to see an end to this war in the Middle East," Chalmers said.
Economists see a tough bind
Stephen Smith, a partner at Deloitte Access Economics, said the RBA had "little appetite to allow inflation expectations to drift higher after such a prolonged period above target". He expects a rate rise next week.
"The difficulty is that the economy is already slowing. Household spending is subdued, the labour market has softened and the housing market has weakened," Smith said.
Josh Gilbert, market analyst at eToro, described inflation as turning into a "higher-for-longer" story in Australia.
"Anyone holding out for rate relief may need to pack plenty of patience, because another hike looks imminent after today," Gilbert said.
Source: theguardian.com
