Shot to rate cut hopes as coffee leads inflation rise
The rising price of coffee beans could be why landlords miss out on a Melbourne Cup day rate cut.
Australian Bureau of Statistics Data released on Wednesday It showed consumer prices rose 3.2 per cent in the 12 months to September, falling outside the Central Bank’s 2 to 3 per cent target range for the first time in more than a year.
This increase was due to strong increases in the costs of education, healthcare, housing, alcohol and tobacco.
Baseline or adjusted average inflation, which is preferred by the Central Bank and eliminates more volatile price movements, also increased from 2.7 percent to 3 percent.
Economists believe the sharp rise in consumer prices has all but ruled out a cut in interest rates when the Reserve Bank meets next week, and CommSec says the RBA is done cutting interest rates for the foreseeable future.
Commsec chief economist Ryan Felsman said one surprising feature of the inflation data was the huge increase in coffee prices.
While inflation of food and non-alcoholic beverages remained stable at 3 percent, prices of coffee, tea and cocoa increased by 14.6 percent.
Mr. Felsman said this was largely due to bad weather at coffee bean plants in Brazil and Vietnam, as well as U.S. President Donald Trump’s tariffs.
“These basic commodity prices then translate into higher prices in grocery stores for some of these goods,” he told AAP.
Annual increases in alcohol and tobacco taxes also contributed to the strong figures.
As analysts and mortgage holders reel from higher-than-expected inflation readings, Finance Minister Jim Chalmers delivers a major speech to business leaders outlining the government’s next steps towards economic reform.
Dr Chalmers said changes were needed to the superannuation performance test, a set of rules that hold super funds accountable for their investment returns.
The government has previously raised concerns the test could stifle investment in certain asset classes such as housing and clean energy.
“We are open to considering responsible changes that maintain very high standards and super funds’ responsibilities to members,” he told the Australian Chamber of Commerce and Industry gala dinner on Wednesday night.
Labor will consult super and experts before putting any reforms to the test.
Dr Chalmers also said the mid-year economic update, expected to be published in December, would not include many new policies.
“The mid-year update will be exactly that – an opportunity to update forecasts and financials,” he said.
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