RBA acknowledges persistent inflation despite economic slowdown

Australians are feeling the pinch from rising costs, but the source of inflation remains complex. The Reserve Bank of Australia (RBA) acknowledges widespread frustration, with Deputy Governor Andrew Hauser admitting, "People are furious about inflation. It’s unfair. It hits people on low incomes. It damages price signals."

The latest figures from the Australian Bureau of Statistics (ABS) show annual inflation rose to 4.0% in August, up from 3.5% in July, while trimmed mean inflation stayed at 3.6%. Housing was the biggest contributor, with prices up 5.7% over the year. Other factors include global costs like oil and fertiliser, which are gradually passed on to consumers.

Structural issues also play a role. The RBA notes that the economy is operating with capacity constraints, meaning demand for workers, goods, and services outpaces supply, pushing up prices. This helps explain why inflation persists even as parts of the economy slow.

Spending habits vary by age group. CommBank data shows that Australians aged 65 and over increased spending by 10.1% in June, while younger and middle-aged groups saw lower growth, likely due to higher mortgage sensitivity to interest rates.

The key question now is whether inflation will ease as the economy cools or if further rate hikes will be needed to bring it under control.