The consumer price index (CPI) rose 1.4 per cent in the September quarter, after rising 0.5 per cent in the June quarter, the Australian Bureau of Statistics (ABS) said today. It is the first set of inflation data released since the introduction of the Federal Government's carbon tax on July 1.
While the ABS said it wouldn't be able to quantify the effect of the carbon tax, Westpac Bank has forecast the tax added 0.4 percentage points to the CPI in the third quarter. Reflecting the impact of the tax, electricity prices rose 15.3 per cent over the quarter, while the price of gas and other household fuels jumped 14.2 per cent.
Health costs also rose sharply, up 2.4 per cent over the quarter to give an annual rise of 7.2 per cent. The main contributor was a jump in the cost of medical and hospital services of 4.5 per cent, which was mainly a result of the means-testing of the Private Health Insurance Rebate, which took effect from July 1.
After the release of the inflation data, the financial markets priced in a 77 per cent chance of a reduction in interest rates at the Reserve Bank of Australia's (RBA) next monetary policy meeting on November 6, down from a 95 per cent chance yesterday, according to data from Bloomberg.
The cash rate is currently at 3.25 per cent following the RBA's decision to cut by a quarter per cent in October. Analysts said the data, while stronger-than-expected, wouldn't stop the central bank from dropping interest rates.
CommSec economist Savanth Sebastian did not believe the inflation figures would deter the RBA from cutting the cash rate in November.
"I don't think it's going to shift the Reserve Bank's position when it comes to rates, we're still expecting a rate cut on Melbourne Cup Day," he told AAP.
