Inflation jumps to 3.2%, dashing hopes of a Melbourne Cup day rate cut for homeowners | Australian economy

Inflation jumped to 3.2% in September from 2.1% in June as reduced government subsidies led to higher household electricity bills.

Any chances of a follow-on rate cut next Tuesday – or this year – have been dashed after new Australian Bureau of Statistics figures also confirmed the first rise in headline inflation in nearly three years.

The Reserve Bank’s preferred measure of shortened averages, which removes the impact of large, temporary price movements, rose by 1% in the three months to September, well above the 0.6% rate the RBA had forecast.

_{Sign up: AÜ Breaking News email}

This left inflation on this shortened average measure at 3% for the year, compared to 2.7% in June.

It was the first rise in headline inflation since the end of 2022 and will trigger alarm bells for the central bank ahead of its two-day monetary policy committee meeting on Monday.

Estimates for the fourth rate cut are likely to be postponed to 2026.

ABS said the main contributor to the annual inflation rate was a 24% increase in electricity prices.

The ABS said this was “primarily related to higher out-of-pocket expenses for households in Queensland, Western Australia and Tasmania compared to the same period last year”.

Gas prices dropped, but there was plenty of evidence that the cost of living continued to rise.

Grocery products increased by 3.1% compared to September; This includes a 15% increase in coffee, tea and cocoa prices due to problems with coffee bean suppliers abroad.

RBA governor Michele Bullock this week made clear that a 0.9% quarterly rise in headline inflation would be a “significant loss” and signaled that the monetary policy board would not be ready to make a fourth rate cut.

While Australians will feel the pain of higher electricity prices, more worrying for the central bank has been the unexpected and unwelcome rise in underlying inflation.

Bullock made clear this week that the central bank is, for now, more concerned about the possibility of a resurgence in inflation than the latest jump in unemployment.

Bullock said the labor market is “not about to fall off a cliff” and the unemployment rate is “still pretty low.”