Australia’s major banks Commonwealth, ANZ and NAB are now expecting a Melbourne Cup Day interest rate hike following bad news on inflation.
The consumer price index of 5.4 per cent for the September quarter was barely changed from the 6 per cent level of June.
Petrol and electricity prices have surged by almost 20 per cent during the past year, the Australian Bureau of Statistics revealed on Wednesday.
A weaker Australian dollar, now worth less than 64 US cents, means imports are more expensive, as workers continue to suffer a cut in real wages.
The bad inflation news saw the Commonwealth Bank and ANZ change their forecasts to have the Reserve Bank raising interest rates on November 7, which would be the 13th increase in 18 months.
Three of Australia’s Big Four banks – Commonwealth Bank, ANZ and NAB – are now expecting a Melbourne Cup Day rate rise.
Gareth Aird, the head of Australian economics at the Commonwealth Bank – Australia’s biggest home lender, said the high inflation number would be worrying the Reserve Bank.
‘We believe that pace is sufficiently firm to cause the board some discomfort given the RBA has recently upped its rhetoric on the importance of keeping inflation expectations anchored,’ he said.
Australian inflation remains high, sparking fears of a Melbourne Cup Day interest rate rise (pictured are Woolworths shoppers in Sydney)
Reserve Bank of Australia Governor Michelle Bullock on Tuesday night declared she would not hesitate to raise rates again should inflation remain high
Adam Boyton, ANZ’s head of Australian economics, said the Reserve Bank of Australia’s strident language about inflation during the past fortnight made another rate rise more likely, following the latest inflation data.
‘Given the hawkish rhetoric from the RBA over the past two weeks and an uncomfortably high third quarter CPI outcome, we now expect the RBA to increase the cash rate by 25 basis points in November,’ he said.
Reserve Bank of Australia Governor Michelle Bullock on Tuesday night declared she would not hesitate to raise rates again should inflation remain high.
‘The board will not hesitate to raise the cash rate further if there is a material upward revision to the outlook for inflation,’ she told the Commonwealth Bank Global Markets Conference in Sydney.
‘As we have been saying for some time, it might have been possible to get inflation back to target sooner by raising the cash rate more sharply.’
Treasurer Jim Chalmers conceded inflation was taking a long time to moderate.
‘While inflation is moderating overall, it is proving to be more persistent around the world and more persistent here in Australia,’ he said.
Three of Australia’s Big Four banks – Commonwealth Bank, ANZ and NAB – are now expecting a Melbourne Cup Day rate rise
A separate set of monthly inflation data from the ABS showed petrol prices surging by 19.7 per cent in the year to September, up from August’s annual pace of 13.9 per cent.
The Israel-Hamas conflict has stirred fears crude oil prices could rise, leading to Sydney motorists paying $2.40 a litre for 95 octane premium unleaded.
Bread and cereal costs surged by 8.9 per cent as electricity bills went up by 18 per cent and gas prices rose by 12.7 per cent.
The housing crisis is also getting worse, with Brisbane rents surging by 9.5 per cent during the past year, compared with Sydney’s 8.6 per cent increase.
Insurance and financial services costs soared by 8.6 per cent.
The high inflation rate of 5.4 per cent means workers are effectively suffering a cut in real wages of 1.8 per cent because pay levels are only rising by 3.6 per cent.
The Reserve Bank’s October meeting minutes suggested they had ‘low tolerance’ for inflation remaining above its two to three per cent target beyond June 2025.
The monthly inflation data, which is more volatile, showed prices increasing by 5.6 per cent in the year to September, up from 5.2 per cent in August and 4.9 per cent in July.
A separate set of monthly inflation data from the ABS showed petrol prices surging by 19.7 per cent over the year (pictured is a Sydney service station)
The futures market regards another rate rise as a one-in-five chance, with inflation moderating since hitting a 32-year high of 7.8 per cent in December last year.
A fortnight ago, this was regarded as a one-in-30 probability.
The Reserve Bank’s 12 interest rate rises since May 2022, taking the cash rate to an 11-year high of 4.1 per cent, are already the most aggressive since 1989.
Another increase on November 7 will take it to a 12-year high of 4.35 per cent.