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Australia’s inflation soars to 32-year high | Business and Economy

Annual price growth hit 7.3% in the July-September period, the highest level since 1990.

Australia’s inflation surged to a 32-year high last quarter as housing and gas costs soar, a shocking result that pressured the country’s central bank to return to hikes. stronger interest rates.

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

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

A closely watched core inflation gauge, the cut-off average, also increased by 1.8% in the quarter, bringing the annual pace to 6.1% and much higher than forecast 5, 6%.

That would be unwelcome news for the Reserve Bank of Australia (RBA), which has predicted core inflation will peak at 6% in the December quarter, with the CPI peaking at 7.75%.

Instead, analysts have warned that both prime and key inflation are certain to soar further this quarter with ABS’s new monthly CPI accelerating rapidly in September.

Marcel Thieliant, senior economist at Capital Economics, said: “As a result, CPI inflation will hit 8% in Q4.

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

The RBA is particularly ill-timed as it surprised many people this month by cutting rates to a quarter-point increase, following four 50-basis-point moves.

Rates have risen 250 basis points since May and the RBA wants to go slower to see how drastic tightening impacts consumer spending.

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

Futures contracts still imply a quarter point gain on Nov. 1 to 2.85 per cent, but now show some chances of a December half point and top for approximate interest rates 4.20 percent in July.

The European Central Bank and the Bank of Canada are both expected to raise interest rates by 75 basis points this week, while the US Federal Reserve will do so at its November 2 meeting. .

Australia’s Labor Government bowed to inflation concerns this week by limiting spending in its 2022-23 Budget, despite calls for more cost-of-living support amid price increases.

There are also fears Recent flooding across eastern Australia will lift food prices even higher, with supermarket chain Coles warning of falling fresh food volumes, where prices have risen 8.8% year-on-year.

Wednesday’s CPI report showed that food prices rose at an annualized rate of 9%, which in the third quarter alone increased by 3.2%.

The ABS notes that annual inflation for essential goods and services spiked to 8.4% in the September quarter, indicating the extent of cost-of-living pressures.



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