Inflation in Australia surpassed market expectations in April 2023, with new data from the Australian Bureau of Statistics (ABS) revealing a rise to 6.8 per cent on an annual basis, up from the previous month’s 6.3 per cent.
The governor of Australia’s central bank expressed determination to control inflation, cautioning households about the forthcoming challenges and the persistent risks of higher inflation. The ABS data released on Wednesday showed consumer prices increasing more than anticipated in April, leading to speculation of a possible further rate rise after a surprising policy rate increase earlier in the month, reaching an 11-year high of 3.85 per cent.
ALSO READ: Latest figures ease inflation worries
The Reserve Bank of Australia (RBA) is scheduled to convene next week to assess the economic situation and make decisions regarding the June interest rate. The current annual inflation increase of 6.8 per cent is higher than the 6.3 per cent rise reported in March 2023 but remains below the peak of 8.4 per cent recorded in December 2022.
According to Michelle Marquardt, head of price statistics at the ABS, the soaring price of fuel primarily contributed to the consistently high inflation in April. She highlighted that the reduction of the fuel excise tax in April 2022, fully reversed by October 2022, had an impact on the annual movement for April 2023.
The RBA has already implemented substantial interest rate hikes, totaling 375 basis points since May last year, resulting in an 11-year high of 3.85 per cent. The central bank has warned of the potential need for further rate increases to bring inflation back to its target level. The governor reiterated that success in the fight against inflation is not guaranteed, and Australian households should prepare for a challenging period ahead.
Market predictions suggest that the RBA will maintain steady rates next month, although there is a significant chance of another quarter-point hike in August or September. It is expected that rates will remain elevated throughout the year.
Recent economic data has indicated a softening trend, with flat retail sales in April as consumers reduced spending on food and dining out. Additionally, quarterly wage gains fell short of expectations, and the previously strong labour market showed signs of cooling.
The surprise increase in the monthly CPI indicator to an annual rate of 6.8 per cent in the year to the end of April is a sober reminder of the seriousness of the persistent inflation challenge, Innes Willox, Chief Executive of the national employer association, Ai Group, said today.
“The continued inflationary pressure makes it even more important that businesses, governments, employees and the Fair Work Commission exercise restraint in price and wage setting.
“An excessive increase in the minimum wage would clearly risk further embedding inflation and setting off a wage-price spiral.
“With both the Reserve Bank and the Government prioritising a return of inflation to less than 3 per cent, it is critical that we do as much as possible to avoid additional increases in interest rates,” Mr Willox said.
Keep up to date with our stories on LinkedIn, Twitter, Facebook and Instagram.
