Australia’s Monthly Inflation Rises to 4 Percent in May

A variety of Australian dollar notes on display in Hong Kong, China, on Feb. 22 2004. Richard A. Brooks/AFP via Getty Images

Australia’s monthly inflation rate has risen again in May, raising concerns about the possibility of another interest rate hike.

New data from the Australian Bureau of Statistics (ABS) showed that the monthly consumer price index (CPI) rose 4 percent in the year to May 2024, up from 3.6 percent in April.

The new rate was also higher than market expectations of a 3.8 percent annual increase and marked the third consecutive rise since February.

Price growth in May was driven by increases in several goods and service categories, including housing (up 5.2 percent), food and non-alcoholic beverages (up 3.3 percent), transport (up 4.9 percent), and alcohol and tobacco (up 6.7 percent).

Rents climbed by 7.4 percent due to the tight propery rental market across the country.

Electricity prices also rose by 6.5 percent as households were using up the electricity rebates provided by the government as part of its living cost relief package.

However, when excluding volatile items from the CPI, underlying inflation dropped from 4.1 percent in April to 4 percent in May.

“Consumer price index inflation is often impacted by items with volatile price changes like automotive fuel, fruit and vegetables, and holiday travel,” ABS head of prices statistics Michelle Marquardt said.

Concerns About Another Interest Rate Hike

Following the data’s release, Innes Willox, the CEO of the Australian Industry Group, said the latest inflation figure was “a clear warning” that the Australian economy should prepare for further interest rate hikes in the coming period.

At its June 2024 board meeting, the Reserve Bank of Australia decided to keep the official cash rate at 4.35 percent.

While the rate has remained unchanged since November 2023, the central bank has said it would not rule out further interest rate increases to bring inflation down to its target range.

“That our current monetary policy settings have not yet brought inflation to heel leaves little room to doubt that more tightening by the Reserve Bank may be required,” Mr. Willox said.

“Our members across the economy are advising that inflationary and cost pressures are still running very strongly with no clear easing in sight.

“Any further rate increases will undoubtedly lead to businesses making hard decisions about their staffing levels.”

The CEO then urged the government to do its part in containing inflation.

Pointing to the unrestrained spending featured in the May federal budget, Mr. Willox said it had driven up debt and deficits while not being helpful in combating inflation.

A man pays a market vendor in Melbourne, Australia, on July 23, 2013. Scott Barbour/Getty Images

Inflation Would Be Higher Without Labor’s Policies: Treasurer

Meanwhile, Treasure Jim Chalmers downplayed concerns about the significant increase in the monthly CPI, saying the metric was volatile in nature.

“As we’ve said many times before, the monthly CPI number is volatile and can jump around because not every item in the basket is updated each month,” he said in a statement.

“Today’s annual number was dragged higher by fuel prices and the impact of base effects, which are the result of a large fall in month-to-month inflation in May 2023, impacting the annual May 2024 number.”

While the treasurer acknowledged that inflation was higher than what the Labor government would like, he said the May result was less than half its peak and much lower than the 6.1 percent Labor inherited from the Coalition.

“We know people are under substantial pressure, but the ABS clearly confirmed again today that inflation would be even higher if it wasn’t for our cost-of-living policies,” Mr. Chalmers said.

“We’ve seen around the world that inflation can zig and zag on its way down, it doesn’t always moderate in a straight line, and the last mile can be a bit harder.”