Australia’s inflation spikes to 32-year high

Annual price growth reached 7.3 percent in the July-September period, the highest since 1990.

Australian inflation hit a 32-year high last quarter as the cost of home construction and gas rose, a shocking result that fueled pressure for the country’s central bank to raise rates more aggressively again.

Data from the Australian Bureau of Statistics (ABS) showed on Wednesday that the consumer price index (CPI) rose 1.8 percent in the September quarter, beating market forecasts of 1.6 percent. .

The annual rate soared to 7.3 percent from 6.1 percent, the highest since 1990 and nearly three times the pace of wage growth.

A closely watched measure of core inflation, the trimmed mean, also rose 1.8 percent in the quarter, taking the annual pace to 6.1 percent and again well above forecasts of 5.6 percent. .

That would be unwelcome news for the Reserve Bank of Australia (RBA), which had thought core inflation would peak at 6 percent in the December quarter, with the CPI hitting 7.75 percent.

Instead, analysts warned that both core and headline inflation would rise further this quarter with the new monthly ABS CPI accelerating in September.

“The bottom line is that CPI inflation will approach 8 percent in the fourth quarter,” said Marcel Thieliant, senior economist at Capital Economics.

“The stronger-than-expected rise in consumer prices is consistent with our forecast that the RBA will raise rates more aggressively than most anticipate.”

It is particularly untimely for the RBA, as it surprised many this month by switching lower to a quarter point rate hike, after four 50 basis point moves.

Rates have already risen 250 basis points since May and the RBA wanted to slow down to see how the drastic tightening was affecting consumer spending.

Investors now suspected that the central bank might have to reconsider, perhaps not at its policy meeting next week but in December.

Futures still imply a quarter-point move on Nov. 1 to 2.85 percent, but now show some chance of a half-point rise in December and a spike for rates of about 4.20 percent in July. .

The European Central Bank and the Bank of Canada are expected to raise rates by 75 basis points this week, while the US Federal Reserve is due to match that at its meeting on November 2.

Australia’s Labor government bowed to inflation concerns this week by restricting spending in its 2022-23 budget, despite calls for more cost-of-living support amid skyrocketing prices.

There are also fears that recent flooding in eastern Australia will push food prices even higher, with supermarket chain Coles warning of declining volumes of fresh food, where prices rose 8.8 per cent. Over the previous year.

Wednesday’s CPI report showed that food prices were already rising at a 9 percent annual pace, with the third quarter alone seeing a 3.2 percent rise.

The ABS noted that annual inflation for essential goods and services jumped to 8.4 percent in the September quarter, highlighting the extent of cost-of-living pressures.