Australia’s prices rise at fastest pace in over two decades

Inflation rises to 6.1 percent in the second quarter amid expectations of further interest rate hikes.

Australia shopping
A man carries shopping bags through a mall in Sydney, June 2, 2008. Australian retail sales suffered a surprise fall in April as consumers cut spending on food and recreation in the face of surging living costs, but also perhaps lessening the need for a further increase in interest rates [File: Will Burgess/Reuters]

Australia’s prices rose more than 6 percent in the second quarter, the biggest spike in two decades, bolstering the case for interest rate hikes by the country’s central bank.

Inflation for the year through June rose to 6.1 percent, the highest since 2001 and up from 5.1 percent in the second quarter, the Australian Bureau of Statistics said on Wednesday.

The country’s consumer price index (CPI) jumped 1.8 percent on a quarterly basis, just shy of market forecasts.

Inflation last year came in at 3.5 percent.

The surging prices are likely to bolster expectations that the Reserve Bank of Australia will hike its benchmark interest rate for a fourth consecutive time at its next monthly board meeting on August 2.

The central bank rolled out hikes of half a percentage point at its July and June meetings, following a quarter of a percentage point increase in May.

Treasurer Jim Chalmers warned that inflation would rise further.

“We are not surprised to see inflation north of 6 percent, but it’s still confronting,” Chalmers said. “Inflation is high and rising. It will get tougher before it starts to ease.”

Chalmers, who was elected as part of the centre-left Labor Party government that took office in May, is on Thursday expected to outline to Parliament an economic outlook that has deteriorated significantly since the previous government announced its economic plan in March.

In March, Australia’s gross debt as a share of the economy was forecast to peak in mid-2025 at 44.9 percent, or 1.117 trillion Australian dollars ($773.2bn). Net debt — gross debt less the value of selected financial assets — was predicted to peak at 33.1 percent of gross domestic product, or 864.7 billion Australian dollars ($598.5bn), a year later.

Source: News Agencies