The latest inflation data released yesterday 29th of October has thrown a spanner in the works for anyone hoping the RBA might cut rates next week.
According to the ABS, annual inflation rose 3.2% over the year to September, up from 2.1% in the June Quarter.
The RBA’s preferred measure, the trimmed mean, also climbed to 3.0% annually, up from 2.7%
What’s behind the surprise?
Electricity prices surged almost 24% year-on-year after government rebates rolled off and we’re also seeing stronger price growth in groceries, travel and services.
Basically, the ripple effect of higher input costs and rising wages is flowing through to consumers.
Businesses are protecting their margins and without meaningful gains in productivity, the key ingredient that’s underpinned Australia’s prosperity since World War II, the cost of living will continue to outpace wage growth.
As the saying goes, “Productivity isn’t everything, but in the long run it is almost everything.”
A nation’s ability to lift its standard of living depends almost entirely on how effectively it raises output per worker through better technology, skills, systems and focus.
So, what does this mean for interest rates in the short-term?
This stronger-than-expected reading has pretty much killed hopes of a rate cut at the 4 November RBA meeting.
Markets have now priced in only about an 8% chance of a cut in November, a steep fall from 81% just weeks ago, when rising unemployment had fuelled hopes the RBA might drop rates.
While the near-term outlook is cautious, a number of major banks and economists still believe that the next round of cuts could come in early 2026, though that path is looking far less certain.
Source: ABS
Reach Out to Us
If you would like to discuss your next steps, property plans, and mortgage strategy, get in touch with us today. Our team of experts is here to guide you through the complexities of the market and help you achieve your property goals.
