Australian Inflation Remains Sticky at 3.5%, Fueling Rate Hike Debate

Australia's inflation rate remains high, increasing 3.5% over the past year according to new data from the Australian Bureau of Statistics (ABS). This is down slightly from June's 3.8%, but above economists' expectations for a sharper slowdown.

The Reserve Bank of Australia (RBA) considers trimmed mean inflation, which held steady at 3.6% over the past year, to be its preferred measure of underlying price pressures. This rate is well above the central bank's target range of 2%-3%. Housing was the largest contributor to annual inflation, rising 5.0%, followed by food and non-alcoholic beverages at 3.2% and recreation and culture at 2.6%.

Rachael McCririck, head of price statistics for the ABS, noted that new dwelling prices rose 5.7% over the year as builders passed on higher material and labor costs. The RBA has been monitoring inflation closely, and Governor Michele Bullock warned in August that inflation remained too high to consider rate cuts.

Wee Khoon Chong, senior APAC market strategist at BNY, described the inflation reading as 'sticky', noting that trimmed mean inflation had failed to ease. He expects the persistence of underlying pressures to reinforce the RBA's cautious stance and maintain its view that policy remains 'somewhat restrictive'.