Inflation jumped to 3.8 per cent in October, up from 3.6 per cent in September.
The largest contributors to annual inflation were housing (+5.9 per cent), food and non-alcoholic beverages (+3.2 per cent), and recreation and culture (+3.2 cent).
This is the first release of the complete Monthly Consumer Price Index (CPI) from the Australian Bureau of Statistics (ABS).
Michelle Marquardt, ABS head of prices statistics, says it marks the transition from the traditional quarterly CPI to the complete monthly CPI as Australia’s primary measure of headline inflation.
Australian statistician David Gruen says the transition to complete inflation data every month will give everyone a “quicker read” on inflation.
However, he said monthly data was inherently more volatile than quarterly data, so that would take some getting used to.
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He said the quality of the seasonal adjustments in the new monthly data would also improve over time.
“The benefit of the monthly CPI is that it’s more frequent,” Dr Gruen told the ABC.
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“One drawback is that for about half the basket, we only have 18 months of data.
“So [for] the seasonal patterns, the usual period of time that we use for seasonal adjustment is three years, so we will be doing seasonal adjustment on some part of the basket with less than the ideal amount of information.
“[So] in terms of being confident about the seasonals, I think the complete monthly CPI is going to provide more information but the quality of that information is going to improve as the length of time expands,” he said.
Housing price inflation biggest contributor to inflation
Annual housing inflation was 5.9 per cent in October, up from 5.7 per cent in September.
It reflects cost increases in electricity, rents and new dwellings.
Housing inflation was the largest contributor to headline inflation. With annual inflation running at 3.8 per cent, housing inflation accounted for 1.2 percentage points of that number.
Electricity costs were a big contributor to housing inflation.
The annual rise in electricity costs was running at 37.1 per cent in the 12 months to October, up from 33.9 per cent in September.
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That is primarily related to state government electricity rebates being used up by households. The timing of the rollout of the Commonwealth Energy Bill Relief Fund (EBRF) rebates also impacted electricity costs.
The data show electricity prices have actually decreased for the last three months, in August (-6.3 per cent), September (-0.4 per cent), and October (-10.2 per cent).
However, with the October 2024 electricity costs figure (-12.3 per cent) falling out of the 12-month calculation this month, the newest annual inflation figure still popped higher.
Next month, when the November 2024 figure (+22.2 per cent) drops out of the 12-month calculation for annual electricity inflation, that will impact the annual figure too.
Will the RBA consider lifting rates?
But economists say the overall strength of inflation means the Reserve Bank’s job has become more complicated.
EY chief economist Cherelle Murphy says the RBA will not lower rates at its interest rate meeting on December 9 — which is its last meeting before the summer break.
“A rate hike may even be considered, given the next Monetary Policy Board meeting is not until February,” Ms Murphy said.
“The Reserve Bank needs to reverse the recent trend and get inflation moving back to the mid-point of the target band, while knowing that the full impact of the three 25 basis point rate cuts delivered this year so far have not been fully felt.
“If the re-acceleration in inflation is sustained over coming months — recognising that the monthly number may be exhibiting some volatility — interest rate hikes are more likely than cuts in 2026,” she warned.
ANZ economist Adelaide Timbrell said the new inflation data increased the risk that the interest rate easing cycle had ended.
“It should be noted that the RBA Board is likely to assess the new monthly CPI cautiously, as the monthly data has limited history, which undermines the accuracy of the seasonal adjustment process, adding risk to the trimmed mean, which relies on seasonally adjusted data,” she said.
“This means there will likely be revisions to the trimmed mean result in future iterations of the monthly CPI.
“Still, the extent of the upward surprise is likely to have an impact on the RBA Board’s thinking around the future path of monetary policy,” she said.