
The Reserve Bank of Australia is expected to keep interest rates on hold next week, despite a small uptick in annual inflation.
Australia’s annual inflation rate rose from 3.6% to 3.8% in the June quarter, according to new data from the Australian Bureau of Statistics.
Sally Tindall, research director at RateCity.com.au, said this was the first increase in annual inflation since December 2022.
“While this CPI result was broadly as expected, it doesn’t make it good news,” Ms Tindall said.
“Australia’s annual inflation rate is now officially tracking in the wrong direction.”
However, the inflation figure aligns with the RBA’s own forecasts, allowing it to maintain its current plan for returning inflation to target.
The trimmed mean inflation, which is the RBA’s preferred measure, came in at 3.9% annually, slightly above the Reserve Bank’s prediction of 3.8%.
Ms Tindall said this result still fits within the RBA’s timeline to return inflation to its 2-3% target range by mid-2026.
“Luckily, this result still fits within the RBA’s timeline to return inflation back to target by mid-2026, buying it more time to continue with its current plan,” she said.
Despite the expected rate hold next week, Ms Tindall warned that further rate hikes cannot be ruled out.
“The bottom line is, at 3.8 per cent, inflation in Australia is still too high,” she said.
“If Australia’s inflation rate doesn’t start coming back down soon, or worse still, continues in the wrong direction, the Board will have to act.”
For borrowers, Ms Tindall advised using this time to prepare for potential future rate hikes.
“If you haven’t accounted for the extra dollars from your stage three tax cuts, put that money aside as safe keeping,” she said.
“If that money is already patching up a hole in your budget, now is the time to look at other ways to take the pressure off.”
The major banks are forecasting rate cuts to begin between November 2024 and May 2025, with most predicting five cuts in total.
However, Ms Tindall emphasized that borrowers should not rely solely on the RBA and government to address inflation concerns.
“Don’t just wait for the RBA and the government to find a solution to these inflation woes. See where you can beat the price rises by switching providers, shopping smarter, even seeing how you might earn more money,” she said.