Inflation hit 3.8% in October - is a rate cut off the table?
Inflation rose 3.8% in the year to October, according to the Australian Bureau of Statistics (ABS), beating market expectations of 3.6%.
The largest contributors to annual inflation were housing (+5.9%), clothing and footwear (5.4%), education (5.4%), food and non-alcoholic beverages (+3.2%), and recreation and culture activities (+3.2%).
Electricity costs rose 37.1% over the 12 months, with the annual rise primarily driven by state government rebates being used up by households, as well as the timing of the rollout of the Commonwealth Energy Bill Relief Fund (EBRF) rebates.
"In October last year, state government electricity rebates were in place for Queensland and Western Australia. Over the year, those rebates have been used up and those programs have ended meaning electricity costs rose over the year," the ABS said.
"The timing of when households first received payments, and subsequent catch-up payments, of the 2024-25 EBRF and EBRF 2025 Extension payments, also contributed to the annual rise in electricity costs."
Excluding the impact of the various changes in Commonwealth and state electricity rebates, electricity prices rose 5%.
In the month of October, though, inflation was flat (0.0%) in original terms but rose 0.3% in seasonally adjusted terms.
Deloitte Access Economics partner Stephen Smith says today's figures confirm that a rate cut is off the table for the next few months.
Inflation pressures in the economy have accelerated in the recent past, he explained, noting that the latest data shows, on an annualised basis, trimmed mean inflation was running at more than 4% in October and at more than 3.5% annualised over the past three months.
"Monthly headline inflation surprised on the upside, despite electricity prices falling 10.2% in October alone," Smith says.
"This result follows September quarter inflation figures that came in higher than expected, while the unemployment rate remains low. Throw this inflation print on the pile and it is clear that the RBA cannot justify cutting rates right now."
The RBA kept interest rates on hold at the November 5 meeting at 3.6%.
VanEck head of investments and capital markets Russel Chesler says rising inflation is something to keep an eye on, given the RBA's revised projections of an elevated inflation environment throughout 2026.
"However, barring a sharp spike in either inflation or unemployment - neither of which we have seen in recent years - we think it will continue to be business as usual for Australians. What we've recently seen throughout the 'higher for longer' tightening cycle and cost-of-living crisis is that the Australian economy is remarkably resilient," Chesler says.
This article first appeared on Financial Standard
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