Australians hanging out for a rate cut have been dealt a fresh blow after another hike in inflation.
The consumer price index (CPI) rose by 1 per cent in the second quarter of 2024, bringing annual headline inflation to 3.8 per cent, above the March quarter figure of 3.6 per cent.
The ABS data puts inflation above the RBA target range of between 2 and 3 per cent, which it hopes to achieve by the end of 2025.
In the CPI data released on Wednesday, the ABS flags clothing and footwear (up 3.1 per cent), alcohol and tobacco (up 1.5 per cent) and housing’s 1.1 per cent price rises as the most significant increases across the economy.
“Prices for fruit rose strongly this quarter,” the ABS notes.
The 3.8 per cent inflation number is an annual figure, and the first increase in annual inflation since the December 2022 quarter.
The Reserve Bank meets next week to make a decision on the cash rate; the central bank consistently holds up the “trimmed mean” inflation figure as a good indicator of whether the economy is heating up.
The trimmed mean lops off the top and bottom 15 per cent to show a steadier underlying inflation rate.
Trimmed mean annual inflation fell slightly to 3.9 per cent, down from 4.0 per cent in the March quarter, Wednesday’s data shows.
The Reserve Bank board meets next Monday and Tuesday, and the central bank has consistently said it would be willing to raise rates for a 14th time since May 2022 if necessary to bring down inflation.
Treasurer Jim Chalmers warned of the “unsurprising” rise earlier on Wednesday.
“I think most economists expect the inflation figures today to be persistent, sticky and stubborn in unwelcome but unsurprising ways,” he told Sky News.
The federal government’s tax cuts and cost of living relief measures brought in on July 1 will not be an issue in the June quarter figures.
Following the June meeting of the RBA board, governor Michele Bullock, said the central bank was “vigilant” in watching for proof inflation was not receding fast enough.
When the board meets next week, it may well decide hiking interest rates is needed to ensure inflation retreats.
The cash rate has held at 4.35 per cent since the last hike in November.
The rate hasn’t been this high since December 2011.
More to come