The Australian Bureau of Statistics (ABS) has announced that consumer prices rose by 1.8% during the September quarter, resulting in inflation reaching a 32-year high of 7.3%. This rise is much faster than had been anticipated for the third quarter and has raised fears that the Reserve Bank of Australia (RBA) may be forced to increase interest rates more than was expected.
Economists had earlier predicted an increase of about 1.6% for the third quarter that would have resulted in inflation reaching 7% for the year. The trimmed mean inflation has also been expected to rise by 1.5% but instead rose by a higher-than-expected 1.8%. The annual trimmed mean inflation rose to its highest level since it was introduced in 2003 to 6.1% in the third quarter, from 4.9% in the previous second quarter.
The biggest contributors to the rise in inflation were the cost of new housing which increased by 3.7% from the previous quarter. The ABS reported that labour shortages in the construction industry caused labour costs to rise and contribute to the rise in inflation. Gas prices also made a significant impact after having shot up by 10.9% during the same quarter. Electricity costs also increased by 3.2% during the third quarter, though the impact on consumers was softened by state government credits. Domestic inflation was also found to be higher than imported inflation, as tradable inflation rose by 1.5% thanks to gas and fuel price increases.
ABS program manager of prices, Michelle Marquardt, said that the CPI quarter increase matched that of the previous quarter but was lower than the 2.1% increase recorded in the first quarter of the year.
CPA Australia senior policy manager, Gavin Ord, expressed concern that the high inflation rates could cause interest rate rises from the RBA. He said that such a move would impose more stress on businesses that would suffer higher costs. He is encouraging businesses to find ways of improving their cash flow, reassess their debt and boost their profitability through high-margin sales and cutting costs.
The RBA had recently begun to slow its increase in rates last month when it announced a 25-basis points increment. This is lower than the 50-basis points increases it had instituted in previous months. With inflation now at record highs, experts expect that the RBA may revert to its steep hikes to the official interest rates during the next policy meeting that is expected to take place next week.
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