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Decisive inflation data revealed as RBA decision looms

3 minute read

The Australian Bureau of Statistics has released its latest inflation figures.

The Consumer Price Index (CPI) lifted 1.2 per cent during the September quarter, according to the Australian Bureau of Statistics (ABS), resulting in an annual increase of 5.4 per cent.

Quarterly headline inflation re-accelerated from 0.8 per cent in the previous quarter, while the annual rate moved down from 6.0 per cent over the 12 months to the end of June.

The market and three of the big four banks had anticipated a quarterly lift in headline inflation of 1.1 per cent and an annual increase of 5.3 per cent.

“CPI rose 1.2 per cent in the September quarter, higher than the 0.8 per cent rise in the June 2023 quarter. The rise this quarter however continued to be lower than those seen throughout 2022,” said ABS head of prices statistics Michelle Marquardt.

“While prices continued to rise for most goods and services, there were some offsetting falls this quarter including for child care, vegetables, and domestic holiday travel and accommodation.”

The most significant contributors to the rise were automotive fuel (+7.2 per cent), rents (+2.2 per cent), new dwellings purchased by owner-occupiers (+1.3 per cent), and electricity (+4.2 per cent).

Trimmed mean inflation was up 1.2 per cent over the quarter and 5.2 per cent over the year. The market had predicted that the underlying inflation measure would increase by 1.0 per cent quarter-on-quarter (q/q) and 5.0 per cent year-on year (y/y).

In its August statement on monetary policy, the RBA forecast that annual headline inflation will fall to 4.1 per cent and trimmed mean inflation to 3.9 per cent by the end of this year.

“We think the Reserve Bank of Australia can probably look through a CPI print slightly higher than their August forecast so long as the path back to the target remains on track,” economists at ANZ said in the lead up to the latest CPI release.

The RBA will publish updated forecasts in the next statement on monetary policy on 10 November following its upcoming board meeting on 7 November.

Prior to Wednesday’s key inflation data, CBA attributed a 40 per cent chance of a 25 basis point rate hike at the November meeting. It had tipped a headline inflation rate of 0.9 per cent q/q and 5.1 per cent y/y for the September quarter, lower than the other big four.

“The RBA is willing to engineer a slower return to their inflation target in order to preserve the gains made in the labour market,” CBA economist Stephen Wu said.

“But as the October board minutes stated, ‘the board has a low tolerance for a slower return of inflation to target than currently expected’.”

More to come.

Jon Bragg

Jon Bragg

Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.