Higher oil prices add fuel to inflation spike | The Business
Headline inflation jumped to 4 per cent in August, from 3.5 per cent in July, driven by higher housing costs and soaring fuel prices. But underlying inflation remained at 3.6 per cent for the third month in a row.
Housing was the biggest driver of inflation with electricity prices up 13.2 per cent in the year to August as some energy rebates rolled off. The cost of building new homes rose more than 5 per cent and rent increases remained elevated. Fuel also surged 13.5 per cent and was up almost 14.8 per cent in August alone, driven by higher oil prices and the unwinding of the fuel excise cut.
The news comes a day after the central bank lifted interest rates for the fourth time this year, to their highest level in 15 years, to try to drag inflation down and stop high inflation becoming embedded in Australia’s economy.
William Buck chief economist Besa Deda said underlying inflation remains elevated above the RBA’s target band “so it really validated the decision by the Reserve Bank yesterday to raise the cash rate.”
The big four banks, Commonwealth Bank, ANZ, NAB and Westpac will pass on the hike in full, increasing variable loan rates on the 9th of October.
Money markets are now betting the RBA will likely keep rates on hold at its next meeting in early November.
The odds of a rate hike fell to around 20 per cent, according to market data from LSEG.
Independent economist Nicki Hutley told The Business, that if the Reserve Bank pulls the trigger on a November rate rise “there’s probably a 40% chance we could go into a downturn.”
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