Australia’s inflation has cooled again but economists say the Reserve Bank may still deliver another interest rate hike this year, warning that the risk remains “live” despite softer price growth.
New figures from the Australian Bureau of Statistics show annual headline inflation eased to 3.5% in July, down from 3.8% in the year to June. While the moderation is welcome, the result was slightly higher than the 3.3% many economists had forecast.
Housing remained the biggest driver of inflation, rising 5% over the year due to higher costs for new dwellings. Food inflation climbed 3.2%, largely pushed by more expensive dining out and takeaway meals. Transport inflation rose 1.6%, with a sharp jump in fuel prices adding fresh pressure.
“On a monthly basis, automotive fuel prices rose 7.5% in July after falling for three months in a row,” said ABS head of price statistics Rachel McCririck. The annual inflation rate is now lower than it was before the start of the Iran war in February, but volatility remains.
Treasurer Jim Chalmers welcomed the “moderation” in inflation but cautioned that households are still feeling the strain. He noted that fuel excise relief ends in August, meaning next month’s figures may show renewed upward pressure. “Inflation will bounce around a bit as it gets further down to the Reserve Bank’s target range,” he said.
With housing, fuel and food continuing to push prices higher, economists say the RBA may need to act again if inflation stalls on its path back toward the RBA target range.
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