RBA boss faces grilling after inflation spike

Reserve Bank of Australia Governor Michele Bullock will likely be prodded for her thoughts on an uncomfortable set of consumer price data at a parliamentary hearing.

The head of the central bank and Assistant Governor Chris Kent will face questions on Thursday after inflation accelerated on a quarterly basis.

Petrol, rent, new builds and electricity helped fuel the higher-than-expected 1.2 per cent lift over the three months to September, up from 0.8 per cent in the June quarter.

Annual inflation moderated to 5.4 per cent from six per cent.

The central bank has kept interest rates on hold at 4.1 per cent for the past four meetings but repeatedly warned more tightening may be needed.

Earlier in the week, Ms Bullock made it clear the board would not hesitate to act if there was a “material upward revision” to the outlook for inflation.

Treasurer Jim Chalmers said the inflation numbers would not materially change Treasury’s forecasts but the RBA would make its own assessment.

Several economists believe the consumer prices data, particularly the underlying measures, were hot enough to warrant concern.

Both Commonwealth Bank and ANZ economists have revisited their forecasts, with the big banks now leaning towards a 25 basis point hike in November. NAB was already expecting the board to move next month.

Though Deloitte Access Economics economists did not believe the September figures supported the case for more interest rate increases.

“We would question the efficacy of further increases in interest rates from here, given that none of the excessive price growth in the September quarter appears to be driven by strong household spending or an over-heating economy,” partner Stephen Smith said.

If a 13th rate hike eventuates, the average borrower will be slugged with another $76 increase to their monthly repayments, according to RateCity analysis.

In total, households with a $500,000 debt at the start of the hikes would have to find an extra $1210 a month if the cash rates inches 25 basis points higher.

The recovering property market has also been eyed warily by the central bank as it wants less consumption but consumers tend to spend more when they are feeling wealthier.

Home prices have almost completed a full recovery from their 2022 downturn though Domain’s latest update shows the pace of quarterly growth is easing.

Prices increased 1.9 per cent for houses over the September quarter and 1.8 per cent for units, though growth slowed by roughly one-third compared to the previous quarter.