Australia’s monthly consumer price index (CPI) rose 5.2% year-on-year in August, putting the Reserve Bank of Australia on alert for a potential interest rate increase by the end of the year. The Australian Bureau of Statistics reported that the annual inflation rate for August increased compared to July, with economists predicting this rise due to higher fuel costs. However, despite this increase, the current inflation rate remains well below its peak of 8.4% in December.
The main contributors to the August increase were housing costs, which rose by 6.6% year-on-year, transport, which climbed 7.4%, and food and non-alcoholic beverages, which saw a 4.4% rise. Insurance and financial services prices also increased by 8.8% compared to the previous year.
Core inflation, which excludes volatile food and energy prices, slowed to an annual pace of 5.5% in August, down from 5.8% in July.
The Reserve Bank of Australia has emphasized its commitment to monitoring emerging data and has warned that additional interest rate hikes may be necessary. While the bank has implemented a 400 basis point increase in the official cash rate since May 2022, it has chosen to keep rates steady for the past three months.
Although building material price increases have eased due to improved supply conditions, rental costs saw a slight uptick, rising by 7.8% year-on-year in August, up from 7.6% in July.
In terms of utilities, electricity prices increased by 12.7% and gas prices rose by 12.9% on an annual basis. These price jumps were primarily driven by wholesale price increases. However, government rebates introduced in most cities from July helped offset the impact of electricity price increases for eligible households.
As the Reserve Bank of Australia closely observes economic indicators, the possibility of further interest rate adjustments remains for the coming months.