Inflation jumped to 3.8% in the year to December, from 3.4% in the month before, as strong underlying price growth added to the chance of a Reserve Bank rate hike on Tuesday.
The latest figures from the Australian Bureau of Statistics suggested that Australian households once again face a fight to bring rapidly rising consumer prices back under control.
That battle will most likely now start with a rate hike at next week’s RBA monetary policy board meeting, the first since November 2023.
Climbing housing costs in the year to December – including a 3.9% rise in rents and a 21.5% surge in electricity prices as power bill subsidies rolled off – helped drive the unexpectedly high annual inflation figure.
There was also a nearly 10% jump in holiday and accommodation prices as Australians went on holiday.
While the latest headline inflation figures are well above the RBA’s 2-3% target range, they have been temporarily boosted by the rolling expiry of the government electricity subsidies.
Removing the more extreme price moves, and the central bank’s preferred quarterly trimmed mean measure lifted to 3.4% through the year, from 3% in the September quarter.
The Aussie dollar jumped back above US70 cents following the release of the ABS data, reflecting the rising chance of a rate hike on Tuesday.
Before the release of this morning’s figures from the Australian Bureau of Statistics, financial markets were predicting a 60% chance of a rate hike next week.