Australia\u2019s biggest home lender, the Commonwealth Bank, has declared the end of rate cuts after inflation surged above the Reserve Bank of Australia\u2019s target range for the first time in more than a year.<\/p>\n
The consumer price index rose 3.2 per cent in the September quarter, marking the worst annual headline inflation figure since the June quarter in 2024 and the biggest jump between quarters since 2022.<\/p>\n
Inflation is now also above the RBA\u2019s 2 to 3 per cent target for the first time since mid-2024, surprising economists at Westpac, the only big four bank that until today had been forecasting a rate cut next month on Melbourne Cup day.<\/p>\n
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By continuing you agree to our Terms<\/a> and Privacy Policy<\/a>.<\/p>\n Underlying inflation, which removes volatile price movements, grew by 3 per cent. Known as the trimmed mean, it is the RBA\u2019s preferred measure of price pressures.<\/p>\n Services inflation was even worse, growing at an annual pace of 3.5 per cent thanks to a 4.7 per cent jump in housing costs and a 5.3 per cent surge in the cost of education.<\/p>\n Treasurer Jim Chalmers blamed the end of State Government electricity rebates for the spike in headline inflation, with power prices soaring by more than a third during the past year.<\/p>\n \u201cThe point I would make about the numbers today specifically, Mr Speaker, is that the headline number increased largely as a result of the end of State energy rebates but it\u2019s still much lower than its peak,\u201d he told the House of Representatives on Wednesday.<\/p>\n Homeowners servicing a mortgage are set to be the big losers with the Commonwealth Bank\u2019s head of Australian economics Belinda Allen declaring the RBA would now stop cutting rates, with February relief now off the table.<\/p>\n \u201cGiven the material upside surprise and the broad\u2011based nature of pricing pressures, we now expect the RBA to remain on hold from here,\u201d she said.<\/p>\n Westpac chief economist Luci Ellis declared the RBA would now be unlikely to cut rates in either November or December, with even February no longer a certainty.<\/p>\n \u201cWhere the RBA\u2019s head space is at, they are going to push out for quite a while,\u201d she told The Nightly. \u201cEven a February cut is far from certain now given the size of the upside surprise. It was higher than we had forecast.\u201d<\/p>\n Rising rates?<\/p>\n Judo Bank\u2019s chief economic adviser, Warren Hogan, said broad-based inflationary pressures would most likely see the Reserve Bank of Australia start raising interest rates in May, which would see the cash rate climb from 3.6 per cent now to 4.75 per cent by 2027 for the first time since November 2011.<\/p>\n \u201cThe problem is the economy\u2019s turned a corner and now inflation\u2019s turned a corner and history shows that this stuff is pretty directional,\u201d he told The Nightly.<\/p>\n \u201cMy guess is that we\u2019ll be talking about rate hikes when we get back from summer holidays and we\u2019ve got one pencilled in for November next year but it could be as early as May.\u201d<\/p>\n Mr Hogan forecast headline inflation hitting 4 per cent next year, reaching levels last seen in 2023, which would put pressure on Reserve Bank of Australia governor Michele Bullock to make some unpopular decisions. He also predicted unemployment rising from a four-year high of 4.5 per cent now to 5 per cent by 2027.<\/p>\n \u201cThis is going to be the biggest test,\u201d he said. \u201cIf she provides leadership and is honest with the Australian people, then she\u2019s got more chance of getting this thing under control without creating major problems. There\u2019s no way they can keep inflation in the middle of the target band. They\u2019ll look stupid.\u201d<\/p>\n Independent economist Chris Richardson said the RBA was more likely to hold rates for an extended period. \u201cReally ugly number, but for the moment it spells hold rather than raise,\u201d he told The Nightly.<\/p>\n The phasing out of $75 quarterly electricity rebates from the Federal Government has also caused considerable financial pain, with a separate monthly series showing power prices soared by a whopping 33.9 per cent in the year to September 30.<\/p>\n This also occurred following the end Western Australia\u2019s $400 annual electricity subsidies and Queensland\u2019s $1000 rebates.<\/p>\n Food and fuel<\/p>\n Petrol prices are no longer moderating either, with automotive fuel prices climbing by 2.8 per cent over the year, with unleaded in big cities now selling for more than $1.90 a litre.<\/p>\n Supermarket giant Woolworths\u2019s chief executive Amanda Bardwell noted meat prices had risen as fruit and vegetable became cheaper, with the official data showing a 3.4 per cent increase in meat and seafood costs to consumers.<\/p>\n \u201cThis was partially offset by higher meat prices,\u201d she said in a first-quarter sales update.<\/p>\n The futures market had been expecting a November 4 RBA rate cut, on Melbourne Cup day, after unemployment for September hit a four-year high of 4.5 per cent.<\/p>\n But those expectations have been dashed with both headline and underlying inflation growing at a faster pace than economists had been expecting.<\/p>\n","protected":false},"excerpt":{"rendered":"Australia\u2019s biggest home lender, the Commonwealth Bank, has declared the end of rate cuts after inflation surged above…\n","protected":false},"author":2,"featured_media":248091,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[63,43,44,41,39,42,40],"class_list":{"0":"post-248090","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-headlines","8":"tag-australia","9":"tag-headlines","10":"tag-news","11":"tag-top-news","12":"tag-top-stories","13":"tag-topnews","14":"tag-topstories"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/248090","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=248090"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/248090\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/248091"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=248090"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=248090"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=248090"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}