Australia's Inflation Rate Surges Back to 4%, RBA Faces Pressure for Another Rate Hike

Australia's inflation fight just got harder after fresh consumer price data showed annual headline inflation jumped back to 4% in August, a day after the Reserve Bank of Australia (RBA) lifted rates to a 15-year high of 4.6%.

The Australian Bureau of Statistics said the consumer price index rose 0.4% in August, lifting annual headline inflation from 3.5% in July to 4% over the 12 months to August. The move came as higher oil prices continued to work their way through household budgets.

Just as important for policymakers, the trimmed mean, the RBA's preferred measure of underlying inflation, held at 3.6% for a third straight month. This reading strips out the most volatile items, including fuel, and has stayed well above the central bank's 2%-3% target band.

Economists say that matters because a higher headline rate can be explained by a jump in oil prices, but the stubborn trimmed mean suggests broader price pressure is still running through the economy. Housing was the biggest contributor to annual inflation, rising 5.7% in August, as builders passed on higher material and labour costs.

Deloitte Access Economics partner Stephen Smith said that 'inflation in Australia is broad-based, persistent and well above the 2-3 per cent target band.'