Inflation has jumped to 3.2% in the year to September, from 2.1% in June, as waning government subsidies feed through to higher household power bills.
Any lingering chance of a rate cut next Tuesday – or this year – was squashed after the new Australian Bureau of Statistics figures also confirmed the first rise in underlying inflation in nearly three years.
The Reserve Bank’s preferred trimmed mean measure – which removes the impact of large, temporary price moves – climbed by 1% in the three months to September and far ahead of the RBA’s predicted rate of 0.6%.
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That left inflation on this trimmed mean measure at 3% in the year, against 2.7% in June.
It was the first rise in underlying inflation since late 2022, and will trigger alarm bells at the central bank ahead of its two-day monetary policy board meeting on Monday.
Predictions for a fourth rate cut are likely to be pushed back to 2026.
The ABS said the main contributor to the headline annual inflation rate was a 24% rise in electricity prices.
This was “primarily related to households in Queensland, Western Australia and Tasmania having higher out-of-pocket costs” than during the same period last year, the ABS said.
Petrol prices fell, but there was plenty of evidence that the cost of living is continuing to bite.
Grocery items were 3.1% higher in the year to September, including a 15% rise in coffee, tea and cocoa prices thanks to issues with overseas suppliers of coffee beans.
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Michele Bullock, the RBA’s governor, this week made it clear that a quarterly rise in underlying inflation of 0.9% would be a “material miss”, signalling the monetary policy board would not be prepared to deliver a fourth rate cut.
While Australians will feel the bite of higher electricity prices, what has been more concerning for the central bank is the unexpected and unwelcome lift in underlying inflation.
Bullock this week made it clear that the central bank is, for now, more worried about the prospect of resurgent inflation than a recent jump in unemployment.
Bullock said the labour market was not about to “fall off a cliff” and that the jobless measure was “still pretty low”.
