Australia’s inflation is higher than expected, increasing pressure to raise rates


Australia’s annual inflation rate shattered market expectations, rising 3.5% in 2021, according to the report. New data From the Australian Bureau of Statistics (ABS).

The underlying inflation rate has also jumped to 2.6%, the highest level since 2014, reflecting a significant rise in prices.

Annual CPI (Consumer Price Index) inflation surged 1.3% in three months, backed by a surge in the December quarter.

The Big Four expected headline inflation to be 3.2% and underlying inflation to be around 2.4%, but quarterly inflation forecasts ranged from 0.7 to 1.1%.

Michelle Marquardt, head of ABS price statistics, said new homes and automotive fuels continued to drive the rise throughout the December quarter.

“The lack of building materials and labor, coupled with the continued strong demand for new homes, has contributed to higher prices for new homes, townhouses and apartments,” said Marquardt.

Rising fuel prices have also brought record levels in the automotive fuel series for the second straight quarter, Marquardt said.

Each year, fuel is the most important driver of inflation, rising 32.3 percent in 2021.

Epoch Times Photo
Annual rate of change in automotive fuels and CPI. (Australian Bureau of Statistics, 2022)

ABS I got it Its fuel is one of the most volatile series measured by the CPI due to various factors such as domestic demand, its close relationship with global oil prices and exchange rates. This level of volatility also means that it contributes significantly to the movement of headline inflation.

The rise in commodity prices (4.3%) also outpaced the rise in services (2.3%), the highest since 2008.

Marquardt said global supply chain disruptions and material shortages, apart from fuel prices, have contributed to higher prices for a wide range of commodities, coupled with higher transportation costs and demand.

Westpac Bank Senior Economist Justin Smirk Said The underlying inflation rate is currently at the midpoint of the Reserve Bank of Australia’s (RBA) inflation target. This was “not what RBA expected at this early stage, even with a forecast profile of this size.”

The RBA will hold its first monthly financial conference of the year on February 1, and this new inflation data is expected to advance plans for a cash rate hike.

ANZ economist Hayden Dimes said the RBA will “almost certainly” adjust forward guidance so that interest rates can be raised this year after repeating that interest rates will not rise until at least 2024 for the past two years. Said it was necessary to admit.

“Even before today’s printed matter, the RBA emphasized the need to revise the inflation outlook and shift forward guidance,” Dimes said.pdf). “The central case is that the RBA will not move to a rate hike in 2022, and we would like to see a clear acceleration in wage growth.”

Rebecca Chu

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Rebecca Zhu is an Australian reporter based in Sydney. She focuses on Australia’s economy, property and education. Contact her at [email protected]