Key facts
- Australia's annual inflation rate reached 4% in the year to August.
- Fuel prices increased by 15% in August.
- Home building costs rose 5.4% over the 12 months to August.
- Underlying inflation held steady at 3.6% for the year to August.
- Treasurer Jim Chalmers attributed the inflation rise to global oil prices.
- Economists anticipate another rate hike by the Reserve Bank of Australia before year-end.
Australia's annual inflation rate accelerated to 4% in the year to August, up from 3.5% in July, primarily driven by a 15% surge in fuel prices and a 5.4% increase in home building costs. The Australian Bureau of Statistics confirmed that rising transport costs were the main contributor to the monthly price increases. Home building costs were also a significant factor, as builders passed on higher expenses for materials and labor.
Treasurer Jim Chalmers attributed the jump in headline inflation largely to higher global oil prices, exacerbated by the conflict in the Middle East and the end of the government's fuel excise cut. He stated that this was a fact, not an opinion.
Underlying inflation, which excludes volatile items, remained steady at 3.6% for the year to August. Both measures remain well above the Reserve Bank of Australia's (RBA) target of 2.5%.
Economists, including EY's chief economist Cherelle Murphy, believe another interest rate hike by the RBA is likely before the end of the year, as the central bank continues its fight against persistent inflation. Murphy noted that while government spending contributes to demand, global supply shocks are the primary driver of current inflation.
RBA Governor Michele Bullock previously indicated that inflation is too high, driven by domestic capacity pressures but also influenced by global factors like the Middle East conflict and increased spending on data centers. She suggested that inflationary pressures are likely to persist longer than anticipated.