Australia’s underlying inflation pressures are proving stronger and more persistent than anticipated, increasing the likelihood of a Reserve Bank of Australia (RBA) rate hike in November, ANZ Research said on Wednesday.
The trimmed mean measure of inflation—a key RBA indicator—rose 0.5% month-on-month in July, surpassing both ANZ’s forecast and market expectations of 0.3%. The three-month annualised trimmed mean inflation reached a record 4.7%, underscoring the persistence of price pressures. The share of the CPI basket rising by more than 3% surged to 61%, indicating broad-based inflationary pressures.
The upside surprises were concentrated in discretionary spending categories, including clothing, footwear, restaurant meals, furnishings, and domestic holiday travel. Food prices, however, showed few signs of second-round inflationary effects. New dwelling costs continued to climb, rising 0.4% month-on-month for a second consecutive month.
ANZ noted that household demand may not be as weak as previously assessed, prompting a reassessment of its inflation outlook. The central bank has penciled in an average quarterly rise of 0.8% for the second half of the year, but July’s data suggests inflation could overshoot these expectations in the third quarter.
The RBA held its cash rate steady at 4.35% during its August meeting. The next policy decision is scheduled for September 28–29, with markets increasingly focused on the November meeting as a potential window for tightening if inflation remains elevated.
