Australians pining for a rate cut have been dealt another blow after another rise in inflation.
The consumer price index (CPI) rose 1 percent in the second quarter of 2024, bringing annual headline inflation to 3.8 percent, above March's quarterly figure of 3.6 percent.
The ABS data puts inflation above the RBA's target range of between 2 and 3 per cent, which it hopes to achieve by the end of 2025.
Deloitte Access Economics partner, Stephen Smith said the CPI figures “should put to rest the tired view that the RBA should raise interest rates, an action that would do nothing but tempt a recession”.
“Australian mortgage holders and businesses should breathe a sigh of relief as the case for a rate hike should now disappear,” he said.
In CPI data released on Wednesday, the ABS flags clothing and footwear (up 3.1 per cent), alcohol and tobacco (up 1.5 per cent) and house prices of 1.1 per cent as the most significant increases in the economy over the past three months .
“Fruit prices rose sharply this quarter,” ABS notes.
Grapes, strawberries, blueberries, tomatoes and peppers were particularly affected by poor growing conditions.
Annual food inflation eased to 3.3 percent in the June quarter, down from 3.8 percent in the March quarter and the peak of 9.2 percent in December 2022.
Lamb and beef prices have fallen, but pork and seafood have risen.
However, annual food inflation has actually declined for the sixth consecutive quarter.
The 3.8 percent inflation figure is an annual figure and the first increase in annual inflation since the December 2022 quarter.
EToro market analyst Josh Gilbert said there was no smoking gun in the data calling for a rate hike.
“There will be a collective sigh of relief from the RBA at Martin Place today, with today's CPI readings likely to give the board the freedom to leave rates on hold,” Gilbert said.
“This was the most critical data point the RBA had received all year, and it came in better than feared… We can now shift focus away from another hike and instead look towards the first cut,” he said.
“Early market pricing suggests the first cut could appear as soon as February next year.”
But consumers are dragged across the board. Only the cost of communication services fell this quarter.
Compared to this time last year, health care costs 5.7 percent more, insurance and financial services have increased by 6.4 percent and housing by 5.2 percent.
Rents have risen 7.3 percent in 12 months.
The sharp increase has been moderated by changes to Commonwealth Rent Assistance.
“Excluding these CRA changes, rents would have increased by 9.1 per cent over the 12 months,” notes the ABS.
The Reserve Bank meets next week to decide on the cash rate; the central bank consistently holds up the “trimmed average” inflation figure as a good indicator of whether the economy is heating up.
The trimmed mean drops the top and bottom 15 percent to show a more stable underlying rate of inflation.
Diminished average annual inflation eased slightly to 3.9 percent, down from 4.0 percent in the March quarter, Wednesday's data showed.
The Reserve Bank's board meets next Monday and Tuesday, and the central bank has consistently said it would be willing to raise interest rates for the 14th time since May 2022 if needed to bring down inflation.
Treasurer Jim Chalmers warned of the “unsurprising” rise earlier on Wednesday.
“I think most economists expect today's inflation numbers to be persistent, sticky and stubborn in unwelcome but unsurprising ways,” he told Sky News.
The federal government's tax cuts and cost-of-living measures introduced on July 1 will not be an issue in June quarterly figures.
After the RBA's board meeting in June, governor Michele Bullock said the central bank was “vigilant” in watching for evidence that inflation was not slowing fast enough.
When the board meets next week, it may well decide that increases in interest rates are needed to ensure that inflation recedes.
The cash rate has been held at 4.35 percent since the last increase in November.
The price has not been this high since December 2011.
There will be more coming
