Prices were 5.4% higher in September than the previous year, according to the latest official inflation figures.
While the result is lower than in recent months, it’s higher than the Reserve Bank of Australia expected, adding to speculation it may raise interest rates again next month.
Inflation measures price growth. It summarises prices in around 90 categories (e.g. fruit, rent, furniture). When inflation is high and unpredictable, your money buys less.
Like many countries, Australia has been battling high inflation. The RBA wants inflation to fall back to 2-3%.
Note: ‘Falling’ inflation doesn’t mean falling prices, it means prices are rising at a slower rate than before.
Today’s update provided inflation figures for the September quarter (July-September). Over those three months, prices rose 1.2%, a higher increase than the previous quarter.
The areas of fastest growth were transport costs (up 3.2% in three months) and housing costs (up 2.2%).
Rents (a component of housing costs) also rose 2.2% for the quarter, and 7.6% in the past year — the biggest annual rise since 2009.
Earlier this week, new RBA Governor Michele Bullock warned the Bank would “not hesitate” to raise interest rates further if inflation did not reduce at the RBA’s desired pace.
Higher interest rates discourage borrowing and spending. The RBA has raised rates on 12 occasions since May 2022, but has left them unchanged for the last four months.
The RBA’s next meeting is on 7 November.
Higher interest rates can lead to job losses. This is because lower spending due to high interest rates can reduce business revenue, making them more likely to fire staff or avoid hiring new workers.
The current unemployment rate is 3.6%, which is historically low and has remained low despite recent interest rate increases. However, there are some signs of a shift. Employment for young workers has fallen by over 30,000 since June.