RBA Holds Interest Rates Steady After September Inflation Jump

With inflation jumping higher than expected in the September quarter, the Reserve Bank of Australia (RBA) has kept interest rates on hold at 3.6 percent.

The decision was widely expected by markets and comes with one RBA meeting left this year.

The ABS data reported last week showed inflation rose to 3.2 percent over the year—up from 2.1 percent in June, owing to the end of electricity rebates in several states pushing up power bills.

RBA Governor Michele Bullock said inflation in the September quarter was higher than expected in their forecasts, not leaving much for the board to consider.

Bullock said that the RBA is still targeting 2.5 percent as the official inflation target.

“Just below three is not good enough for the board,” she said.

Inflation Still Too Hot

With inflation picking up again, price pressures remain too strong for the RBA to justify a rate cut.

The bank also noted signs of ongoing demand in the economy: household spending is holding up, the housing market is strengthening, and building costs are rising again.

On jobs, the RBA pointed to a slight easing—unemployment increased to 4.5 percent—but job vacancies remain high and firms still report difficulty finding workers.

Bullock said that the RBA expects that the unemployment rate will remain “reasonably stable from here on in.”

“I think, at the moment, we’re still confident that inflation is going to come down, and we’ve got employment at a pretty good place,” she added.

The RBA also stressed that part of the inflation rise came from temporary factors, rather than a lasting surge in prices.

Recent cost pressures were driven by short-term spikes in travel costs, council rates, and fuel—items that typically rise at certain times of the year and then ease.

Because these increases are not expected to persist, the bank signalled it does not see the latest jump as a sign of runaway inflation, but rather a seasonal lift that should moderate in coming months.

Treasurer Defends

Yet again, Treasurer Jim Chalmers argued global forces are driving the price spike.

He said that “inflation ticked up in September for every major advanced economy, except the UK, where it was flat.”

Australia has made “remarkable progress,” he said, adding, “We’ve managed to get inflation down while keeping unemployment low and the economy has continued to grow.”

During Question Time, the Opposition seized on the inflation jump to accuse the government of economic failure.

Shadow Treasurer Ted O’Brien said the treasurer had overseen a “litany of economic disasters” and always blamed others.

“Higher energy prices, someone else’s fault … 12 interest rate rises, someone else’s fault … Will the treasurer take some responsibility for his economic mismanagement?” he asked.

Opposition leader Sussan Ley joined in, blaming Prime Minister Anthony Albanese for not keeping his word.

“Labor has just killed a Christmas rate cut. Is this what the prime minister meant when he promised that life would be cheaper under him?” Ley asks.