By Ambar Warrick
Investing.com-- Australian inflation rose more than expected in the September quarter, hitting a 32-year high and likely inviting more interest rate hikes by the Reserve Bank to control rising price pressures.
The Consumer Price Index rose 1.8% in the three months to September 30 from the prior quarter, data from the Australian Bureau of Statistics (ABS) showed on Wednesday. The reading was higher than expectations for a rise of 1.6%, and remained steady from last quarter’s figure of 1.8%.
On an annualized basis, CPI inflation rose 7.3% as of the quarter-end, more than expectations for growth of 7.3% and the previous quarter’s reading of 6.1%. The reading was also Australia’s fastest growth in annual inflation since 1990.
Rising rent and fuel costs were the biggest contributors to the higher-than-expected reading, as Australia struggles with elevated interest rates and increased commodity costs. Food costs also grew sharply in the quarter due to a mix of supply chain issues and poor weather affecting harvests.
"This quarter's increase matches that of last quarter and is lower than the 2.1 per cent result in March quarter this year. All three results exceed any other quarterly results since the introduction of the Goods and Services Tax (GST), and underlie the highest annual increase in the CPI since 1990," said Michelle Marquardt, Program Manager of Prices at the ABS.
The reading shows that the Reserve Bank of Australia may have acted prematurely in toning down its pace of interest rate hikes this month, and likely needs to raise interest rates higher to combat inflation.
The bank said it is trying to maintain a balance between curbing inflation and ensuring that high interest rates do not weigh on the economy. It hiked rates seven times this year from ultra-low levels, and signaled a data-driven approach to future rate hikes.
Australia saw a large spike in inflation this year as the country rolled back most COVID-era restrictions. But the aftermath of COVID-era stimulus measures also factored heavily into rising prices.
The Australian dollar fell 0.3% after the reading and last traded at 0.6377 against the greenback.