Breaking News
Investing Pro 0
🚨 Our Pro Data Reveals the True Winner of Earnings Season Access Data

Australia inflation surges further in Q4, more rate hikes loom

Economy Jan 24, 2023 08:21PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: A customer looks at products marked with discounted prices on display at a chemist in a shopping mall in central Sydney, Australia, July 25, 2018. REUTERS/David Gray

By Wayne Cole

SYDNEY (Reuters) -Australian inflation shot to a 33-year high last quarter as the cost of travel and electricity jumped, a shock result that adds to the case for the country's central bank to raise interest rates again next month.

Investors sharply narrowed the odds on the Reserve Bank of Australia (RBA) lifting its cash rate by a quarter point to 3.35% when it meets on Feb. 7, sending the local dollar up to a five-month high of $0.7085.

Analysts had thought there was some chance the RBA might even pause its tightening campaign, but the sheer pace of inflation put paid to that.

"While this is expected to be the peak in inflation in this cycle, the RBA's hawkish communications lead us to expect another rate rise in February, with another increase likely to follow in March," said Sean Langcake, head of macroeconomic forecasting for BIS Oxford Economics.

Data from the Australian Bureau of Statistics on Wednesday showed the consumer price index (CPI) surged 1.9% in the December quarter, outpacing market forecasts of 1.6%.

The annual rate climbed to 7.8%, from 7.3%, the highest since 1990 and more than twice the pace of wages growth. For December alone, the CPI rose a startling 8.4% compared to the same month a year ago, up from 7.3% in November.

Price rises were broad-based with a closely watched measure of core inflation, the trimmed mean, rising 1.7% in the December quarter. The annual pace accelerated to 6.9%, well above forecasts of 6.5%.

Costs pressures were also building in the service sector which recorded its largest annual rise since 2008, driven by holiday travel, meals out and takeaway food.

Travel was one of the main cost culprits in the December quarter with prices for domestic holidays up 13% and overseas jaunts almost 8%.

"Strong demand, particularly over the Christmas holiday period, contributed to price rises for domestic holiday travel and international air fares," said Michelle Marquardt, ABS head of prices statistics.

"The rises seen for domestic and international travel were notably higher than historical December quarter movements."

With inflation pressures broadening yet further, markets moved to price in the risk of at least two more rate hikes from the RBA with swaps implying a peak above 3.60%.

Futures for three-year bonds sharply reversed course to be down 3 ticks at 96.910, having been up as high as 97.090 before the CPI data.

Australia inflation surges further in Q4, more rate hikes loom
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.
  • Any comment you publish, together with your investing.com profile, will be public on investing.com and may be indexed and available through third party search engines, such as Google.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email