“Real wages are growing at their strongest rate in five years, inflation has a two in front of it, and interest rates have been cut three times in the last six months.”
Just a month ago, Jim Chalmers, an Australian politician, highlighted the economy’s progress recently. However, just five weeks later, one of those statements is no longer true: inflation now has a three in front of it. According to ABS figures released this Wednesday, consumer price growth has sped up to 3% in the year to August. This is at the top of the Reserve Bank of Australia’s target range and has risen from 1.9% in June. No one wanted to say the inflation mission was accomplished, especially not Chalmers. But many of us, including him, surely thought it.
However, the monthly inflation numbers provide only a partial picture. The RBA’s chief economist, Sarah Hunter, has mentioned that the monthly consumer price figures are unreliable. The central bank had expected the end of electricity subsidies to push the headline number back up to 3% by early 2026.
Economists have been blindsided by the week’s data. Johnathan McMenamin, the head of economic forecasting at Barrenjoey, believes that Wednesday’s data represent “one of the worst-case scenarios for the inflation data.” Strong price increases in services, construction costs, and rent inflation have stayed persistent.
“This inflation bumpiness tells us maybe the speed limit of the economy is lower than we thought,” McMenamin says. Persistent inflation means we might not see a rate cut until closer to mid-2026. The next key test will be the inflation report for the September quarter, which won’t be out until October 29.
Source: https://www.theguardian.com/australia-news/2025/sep/26/inflation-jim-chalmers-nobody-wanted-to-say-mission-accomplished
