Strong Aussie Economy May Spark Rate Hike Fears Amid Inflation Concerns

The Australian economy posted a stronger-than-expected growth of 0.4 per cent in the June quarter, but experts warn that this could lead to another rate hike by the Reserve Bank of Australia (RBA). The country's gross domestic product (GDP) rose by 2.1 per cent in the year to June, beating the previous quarter's 2.5 per cent growth.

The Commonwealth Bank has set a benchmark for GDP growth at around 2 per cent, and with annual GDP above this level, experts fear another RBA rate rise is likely. Convera head of market insights Steven Dooley described the strong result as a 'double-edged sword', stating that household consumption and mining exports helped keep growth stronger than expected.

However, Wee Khoon Chong, senior market strategist at BNY, believes the RBA may still hold off on raising rates in September. Chong noted that while underlying activity remains resilient, sticky inflation keeps the prospect of further policy tightening alive.