Monthly CPI figures higher than expected

REA economist Angus Moore says quarterly inflation figures are more important.

Australia’s monthly inflation reading has come in higher than anticipated, reigniting fears that interest rate relief for mortgage holders could be further delayed.

The Australian Bureau of Statistics today reported the annual rate of monthly CPI inflation had ticked up to 3 per cent in August, a sharp acceleration from July’s 2.8 per cent figure, which itself had broken a year-long run of subdued price growth.

Louis Christopher, managing director of SQM Research, said the result would likely capture headlines and force a response from the central bank, even though it is reluctant to lean too heavily on the monthly series.

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“Obviously if there’s a number that’s got a three in front of it in terms of the annualised rate, that’s going to make media headlines and probably force the RBA to make some type of comment,” Mr Christopher said.

Borrowers may have to wait longer for more rate relief. Picture: David Crosling

He noted that the monthly gauge has been “jumping around a little” and is heavily influenced by which data points drop in and out of the reference period. But from November, he said, the ABS would formally shift to publishing the full monthly CPI as its preferred measure.

“When we get to November, the ABS is making it clear that this is going to be their preferred measure,” he said. “So just keep that in mind, the ABS is pushing now for the monthly series to be the preferred measure.”

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Finder’s head of consumer research Graham Cooke said the August number would likely prove pivotal in shaping the RBA’s rhetoric for the rest of the year.

“July’s monthly CPI figure of 2.8 per cent bucked the previous 12-month trend of low inflation, nipping on the edge of the RBA’s target range of 2–3 per cent,” Mr Cooke said.

“All eyes were on today’s figure to see if July was a blip, or if inflation is indeed trending up. (This result) may mean we don’t see any more cash rate cuts for the rest of the year. This will not be the Christmas present any homeowners want.”

PropTrack senior economist Angus Moore said the Reserve Bank was more likely to reserve judgment until it receives the quarterly inflation report due next month.

SQM Research director Louis Christopher.

“The RBA probably won’t read too much into today’s release, and will prefer to wait for the more comprehensive quarterly release next month before making the decision whether to cut,” Mr Moore said.

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“That said, the RBA is expecting underlying inflation will come in around 2.6 per cent in September, though they are expecting headline inflation to be higher, at 3 per cent as electricity rebates roll off. Monthly inflation coming in above that mark may weaken the case for a November cut.”

The latest reading means the prospect of a spring rate cut is slipping further away for mortgage holders and, with cost-of-living pressures still running hot, households may be forced to wait until well into 2026 for relief, according to Canstar data insights director Sally Tindall.

Finder’s head of consumer research Graham Cooke.

“Today’s CPI results are unlikely to move the needle for the Reserve Bank Board when it meets next Monday and Tuesday,” Ms Tindall said.

“While the monthly data can be a helpful indicator as to what’s happening with prices, it doesn’t yet measure a full basket of goods each month and, as a result, can be volatile.

“Heading into next week’s RBA decision, a rate cut seems highly unlikely.

The data-driven Board will almost certainly revert back to hitting pause on the cash rate cuts, giving it time for the more robust quarterly inflation results to come in.”

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