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Inflation concerns rise as Australia's CPI climbs to 3.8% in October
Australia's latest Consumer Price Index (CPI) figures have sent ripples through the economy, with headline inflation accelerating to 3.8% year-on-year in October, up from 3.6% in September. The data, released as part of the country's first monthly CPI read, has sparked concerns about the persistence of underlying inflationary pressures, particularly in the housing sector.
Inflation concerns rise as Australia's CPI climbs to 3.8% in October
Australia's latest Consumer Price Index (CPI) figures have sent ripples through the economy, with headline inflation accelerating to 3.8% year-on-year in October, up from 3.6% in September. The data, released as part of the country's first monthly CPI read, has sparked concerns about the persistence of underlying inflationary pressures, particularly in the housing sector.
Market Analyst at eToro, Farhan Badami, highlighted the significance of the trimmed mean, which surged to 3.3% – the highest since May. "That’s the highest trimmed mean read since May, signalling that underlying inflation is proving far stickier than hoped," Badami noted. The persistent inflationary pressures are evident in the housing market, where annual inflation is running at 5.9%, with rents up by 4.2%. Even a sharp 10.2% fall in electricity prices has failed to alleviate the financial burden on households.
The impact of these inflationary pressures is acutely felt by young Australians aspiring to own homes. "The sad news for young Australians is that the prospect of home ownership continues to drift further away," Badami remarked. Existing homeowners, too, face challenges, as mortgage repayments are unlikely to decrease in the near future. For everyday households, the October inflation figures merely affirm the financial strain they experience on a weekly basis.
The Australian dollar, however, saw a modest lift following the CPI release, providing a small boon for those planning overseas trips or holding positions in export stocks. Yet, the broader implications of the inflation data extend to monetary policy. The Reserve Bank of Australia (RBA) had already anticipated a slow return to the 2-3% inflation target, and the latest figures suggest an even more prolonged recovery period. "This pretty much confirms the RBA's easing cycle might be over before it really started," Badami said, indicating that the cash rate could remain at 4.35% through mid-2026. If inflationary pressures persist, there may even be pressure on the RBA to increase rates.
The labour market is also feeling the effects of inflation, as wage growth remains steady but shows signs of slowing. Ben Thompson, CEO and co-founder of Employment Hero, observed, "Wage growth holding steady this quarter suggests the market is finding its balance." The median total hourly rate has reached $45.20, as employers carefully manage pay rises amid higher labour costs. However, year-on-year wage growth has dipped, with Employment Hero's platform data revealing a 4.8% increase in October, compared to 5% in 2024.
Thompson attributed the slower wage growth to the challenges businesses face in navigating layers of legislation and compliance costs. "It’s never been a more expensive or confusing time to be an employer," he stated. Despite these challenges, businesses are striving to remain competitive and keep their operations afloat.
The inflationary pressures are causing unease among employers, as highlighted by Martin Herbst, CEO of JobAdder. "Inflation ticking up again will make employers nervous, and the labour market is already showing signs of strain," Herbst noted. JobAdder's data indicates that economic uncertainty remains a top challenge for 52% of recruitment agencies, while fee pressure affects 43% of firms.
The current job market is characterised by workers staying put, as changing jobs feels uncertain. Herbst emphasised the need for recruiters to build trust with candidates and help employers regain confidence in investing in their labour force. "The opportunities are out there, and it’s a great time to find talent, but we need to meet the market where it is," he said.
As Australia grapples with rising inflation and its impact on various sectors, policymakers, employers, and workers alike will need to navigate these challenges carefully to ensure economic stability and growth.
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