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Eleanor Creagh, Senior Economist, REA Group. Picture: John Gass<\/p>\n
It was the data set expected to determine the fate of the rate for the rest of 2025. And higher than expected inflation figures have confirmed the cash rate won\u2019t be coming down ahead of Christmas.<\/p>\n
The release of the September quarter inflation numbers by the Australian Bureau of Statistics, revealed the Consumer Price Index (CPI) rose a shock 1.3 per cent for the quarter, coming in above expectations.<\/p>\n
Annual headline inflation was up 3.2 per cent, with the most significant rises for the quarter in housing (2.5 per cent), recreation and culture (1.9 per cent) and transport (1.2 per cent).<\/p>\n
The numbers have taken a November rate cut off the table and cast a serious doubt over a December cut. <\/p>\n
The trimmed mean inflation came in at 1 per cent for the quarter, well above the RBA\u2019s prediction of 0.6 per cent. Annually, the trimmed mean hit 3 per cent, at the top of the RBA\u2019s preferred 2-3 per cent target band. <\/p>\n
The data painted a stark contrast to the previous June quarter, where core annual inflation came in at 2.1 per cent; \u201cthe lowest annual inflation rate since the March 2021 quarter,\u201d sas noted by Michelle Marquardt, ABS head of price statistics.<\/p>\n
Finder\u2019s head of consumer research Graham Cooke was one of many experts monitoring the situation. He noted the RBA had a dilemma on its hands.<\/p>\n
\u201c(This) data release will determine whether the RBA can continue its interest rate easing cycle or needs to put plans on hold, making it the most important inflation data release in 2025,\u201d Cooke said ahead of the release.<\/p>\n
\u201cThe RBA will be looking at this inflation data, as their primary role is to keep inflation in check \u2013 and only now are we starting to see it creep up again towards the upper end of their target range. However, they will also look at the labour market and overall health of the economy. I\u2019ve heard some economists argue that the RBA needs to issue a rate cut not to combat inflation, but to stimulate the economy. It\u2019s going to be interesting to see what they decide.\u201d<\/p>\n
MORE:9 banks slash rates, 3 RBA cuts confirmed<\/a><\/p>\n RBA Governor Michele Bullock said the labour market was tight. Picture: Richard Dobson<\/p>\n The most recent unemployment figures saw a jump to 4.5 per cent, but RBA Governor Michelle Bullock played down any potential reaction, when she addressed the Australian Business Economists annual dinner this week.<\/p>\n Bullock noted that the labour market remained tight and said that monthly data figures could fluctuate.<\/p>\n \u201cThe jump up in the unemployment rate was a bit of a surprise,\u201d she said. \u201cBut monthly numbers can be volatile, and we do know sometimes that they jump up and then they jump back down again.<\/p>\n \u201cWe are conscious that we want to try to keep the unemployment rate as low as we can without fuelling inflation \u2026 it\u2019s very uncertain, so we\u2019ve got to be prepared to consider different possibilities.<\/p>\n \u201cOn the one hand, we\u2019ve got unemployment a little bit higher. On the other hand, we\u2019ve got inflation a little bit higher,\u201d Bullock said.<\/p>\n \u201cWe didn\u2019t go up as high as other countries, so it might mean we don\u2019t have to come down quite as far as other countries.\u201d<\/p>\n Former Sunrise host David Koch, now a spokesman for Compare the Market, claimed that a 3 per cent plus CPI number would lead to more drastic action by the RBA, in the form of a rate hike.<\/p>\n MORE:Rate decision about to go \u2018nuclear\u2019<\/a><\/p>\n \u201cUnemployment is on the rise, which is a warning sign that the RBA may need to cut rates and get the economy moving again,\u201d Koch said ahead of the release.<\/p>\n David Koch said the RBA may be forced to hike rates. Picture: Monique Harmer<\/p>\n \u201cBut if underlying inflation (that\u2019s the trimmed mean) comes in at 3 per cent or above, the Reserve Bank may have no choice but to raise rates. That is the nuclear option.<\/p>\n \u201cAnything above 3 per cent could trigger a hike.\u201d<\/p>\n Koch said that fixing a home loan rate could be attractive to borrowers.<\/p>\n \u201cThe average variable rate is about 5.75 per cent, but we have rates as low as 5.34 per cent,\u201d he said. \u201cMeanwhile, there are two-year fixed rates around 4.75 per cent \u2013 that\u2019s equivalent to four RBA rate cuts. This could be a great option for borrowers who are willing to fix their rate.<\/p>\n<\/p>\n
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