Australian Inflation Rises to 4.3% Ahead of This Week’s Rate Decision
Key Facts
Australia’s consumer price index rose to 4.3% year over year in the 12 months to September, from 4.0% in the comparable period to August, according to the Australian Bureau of Statistics. The increase comes ahead of the Reserve Bank of Australia’s Monetary Policy Board meeting scheduled for November 2 and 3, with a rate decision expected on November 3. After the inflation data were released, market pricing for a 0.25 percentage point rate increase in November rose to about 85%, according to Bloomberg data cited by the Australian Broadcasting Corporation. The week before, the bank’s Deputy Governor Andrew Hauser had warned that the inflation outlook had become “much worse” than the bank had expected. That puts the bank’s imminent decision against a higher annual inflation reading, while details of price components remain important in assessing whether pressures persist.
The rise in prices was not limited to the headline index: annual inflation measured by the trimmed mean, used to gauge underlying inflation, was 3.6% in September. The Bureau of Statistics had published August’s reading at 3.6%, before revising it to 3.5% because of changes in seasonal factors. Quarter on quarter, the consumer price index rose 1.3% in the September quarter, while the trimmed mean increased 1.0%. The quarterly and annual readings show prices continuing to rise across more than one measure, while the trimmed mean provides a reading separate from the headline index. The Bureau of Statistics said housing was the largest contributor to annual inflation in September, after its costs rose 5.2%.
The bank raised its target interest rate at its previous meeting, on September 29, by 25 basis points to 4.60%. In its statement on that decision, it said inflation remained elevated and upside risks had materialized. It also said, however, that the economy appeared to be slowing after the three interest rate increases since the start of the year, which had tightened financial conditions. At that meeting, the bank said disruptions to global oil supplies had kept upward pressure on energy prices and inflation both domestically and globally. It added that higher fuel prices had partly passed through to prices for other goods and services, linking energy developments with the pressures facing Australian prices.
In the oil market, Brent crude fell 1.40% to $111.84 a barrel, while West Texas Intermediate dropped 1.50% to $102.56, at 0011 GMT on November 2, according to Reuters data cited by Dunya News. The decline came as diplomatic hopes eased some immediate supply concerns, after Tehran said Iranian negotiators were in Qatar to discuss a proposal that could allow the Strait of Hormuz to reopen within two days if the United States met Iranian conditions. Iran’s foreign minister said there were no direct talks with Washington. An analyst at KCM Trade described the price decline as appearing to be a technical correction after the previous week’s gains, adding that diplomatic hopes and the absence of a major military escalation over the weekend had eased some immediate pressure. Brent had ended October at its highest closing level in six months, amid fears of an escalation in the U.S.-Iran conflict after the U.S. midterm elections.
Goldman Sachs expects Brent to reach $90 a barrel in December 2026, revising its previous forecast of $85, and also expects an average of $80 a barrel in 2027. The firm estimated that global oil demand exceeded supply by 0.3 million barrels per day in September, compared with a supply deficit of 7.2 million barrels per day in March. It said physical prices remained elevated because of the threat of supply escalation, while global inventories near record lows had spurred restocking. On the supply side, OPEC+ kept its December production targets unchanged, confirming that the next adjustments would not take place before next year, as war-related export disruptions continued. The Reserve Bank of Australia is scheduled to release its rate decision statement and monetary policy statement on November 3 at 2:30 p.m. Sydney time, followed by a press conference at 3:30; it will then publish the minutes of its November meeting on November 17 at 11:30 a.m.