Melbourne mortgage holders have been dealt a blow after new inflation data released today revealed a higher-than-expected surge in prices, effectively ending speculation about a potential Reserve Bank of Australia (RBA) rate cut on Melbourne Cup Day, November 4.
The latest figures show core inflation running at 3.0 per cent, surpassing the RBA’s forecast of 2.6 per cent and exceeding the midpoint of its 2–3 per cent target range. Headline inflation rose to 3.2 per cent over the 12 months to September, up from 2.1 per cent in June. Key contributors included a 2.5 per cent rise in housing costs, alongside strong increases in Recreation and Culture, and Transport.
Economists warn that homeowners and the broader economy face mounting pressures. Dr Brendan Rynne, KPMG chief economist, noted that while an increase was expected after electricity rebates were reduced, the surge was far greater than anticipated. He emphasized that the RBA now has justification to hold rates steady, although private sector growth may require future cuts.
The trimmed mean CPI, the RBA’s preferred measure, also jumped to 3.0 per cent, compared with 2.7 previously. Economists had predicted a much smaller rise of 0.7–0.9 per cent. Stephen Smith of Deloitte Access Economics pointed to electricity price rises and a 6.3 per cent spike in council rates and charges as unexpected drivers behind the inflation figures.
RBA Governor Michele Bullock had earlier warned that a deviation of 30 basis points or more on inflation forecasts would rule out an interest rate cut. Today’s data confirms this warning, indicating that prices are not easing as quickly as the bank hoped, despite higher interest rates and slower consumer spending.
Experts, including David Bassanese from BetaShares and Devika Shivadekar from RSM Australia, agree that a rate cut before Christmas is now unlikely. Rising property prices and strong consumer demand are putting additional upward pressure on inflation, and the RBA is expected to maintain its current rates, betting that higher rates for longer will curb persistent inflation.
