Annual price gains in the July-September time span was 7.3 percent, the most since 1990.
Australian inflation soared to a 32-year high over the course of the most recent quarter as the cost of home construction and gas skyrocketed, fueling calls for the country’s central bank to resume more aggressive rate hikes.
The Australian Bureau of Statistics (ABS) reported on Wednesday that the consumer price index (CPI) rose 1.8 percent in the September quarter, exceeding market expectations of 1.6 percent.
The annual rate jumped from 6.1 percent to 7.3 percent, the highest since 1990 and approximately three times the rate of wage growth.
The trimmed mean, a closely followed measure of core inflation, rose 1.8 percent in the quarter, raising the annual rate to 6.1 percent, well above projections of 5.6 percent.
That’d be bad news for the Reserve Bank of Australia (RBA), which had expected core inflation to peak at 6% in the December quarter, with CPI peaking at 7.75%.
Rather, analysts predicted that core as well as headline inflation would rise even more this quarter, with the ABS’s new monthly CPI intensifying in September.
“The net result is that CPI inflation will reach 8% in the fourth quarter,” said Marcel Thieliant, senior economist at Capital Economics.
“The higher-than-expected increase in consumer prices is coherent with our forecast that the RBA will raise interest rates more aggressively than most expect.”
It comes at a bad time for the RBA, which shocked many this month by decelerating to a quarter-point rate hike after four moves of 50 basis points.
Rates already have soared by a massive 250 basis points since May, and the RBA had hoped to proceed at a slower pace to assess how the drastic tightening was affecting consumer spending.
Investors now believe the Fed will have to reconsider, possibly not at its policy meeting next week, but rather in December.
Futures still predict a quarter-point increase to 2.85 percent on November 1, but there is now some chance of a half-point increase in December as well as an apex for rates of around 4.20 percent in July.
The European Central Bank as well as the Bank of Canada are both anticipated to increase interest rates by 75 basis points this week, whereas the Federal Reserve of the United States is predicted to do the same on November 2.
Despite calls for more cost-of-living assistance in the face of rising prices, Australia’s Labor government bowed to inflation fears this week by cutting expenditure in its 2022-23 Budget.
Also there is concern that recent flooding in eastern Australia will drive up food prices even further, with supermarket chain Coles cautioning of decreasing volumes in fresh food, for which prices are up 8.8 percent year on year.
According to Wednesday’s CPI report, food prices are already rising at a 9 percent annual rate, with the 3rd quarter alone seeing a 3.2 percent increase.
Annual inflation for essential goods and services jumped to 8.4% in the September quarter, highlighting the extent of cost-of-living pressures, according to the ABS.
