Upcoming Inflation Data Poses Challenge for Homeowners

3

The information on this website is general in nature and does not take into account your objectives, financial situation, or needs. Consider seeking personal advice from a licensed adviser before acting on any information.

In an interview with Sky's Weekend Business, Treasurer Chalmers acknowledged that while inflation has notably declined from its peak in 2022, the June quarter consumer price index (CPI) is expected to reveal ongoing inflationary pressures in the economy.

"Inflation doesn't moderate in a straight line," Chalmers stated, emphasizing the volatile nature of inflation trends.

Despite the concerns, Chalmers conveyed optimism that prices would eventually moderate after Wednesday’s data is analyzed, suggesting a longer-term downward trend.

Worry over another potential rate hike by the Reserve Bank of Australia (RBA) has intensified after a surprisingly high CPI reading on June 26. The Australian Bureau of Statistics reported that the CPI had soared to 4% for the year to May, up from 3.6% in April - exceeding the 3.8% increase anticipated by economists.

This unanticipated spike led some economists to predict that the RBA might increase its cash rate if the new CPI figures confirm sustained inflation. The RBA's cash rate acts as a reference point for interest rates across the economy, with banks often quick to pass on rate increases to mortgage holders, compounding their financial burdens.

Deloitte, in its latest Business Outlook, cautioned that an additional rate hike could exacerbate existing economic frailties. "Consumer and business confidence is at an all-time low, household budgets are under intense pressure, and insolvencies continue to rise," the report stated.

The uncertain economic environment had many Australians looking forward to the start of July as a breather, with anticipated tax cuts and other relief measures. A rate hike by the RBA, just as relief efforts materialize, would significantly impact consumers and businesses alike.

The Commonwealth Bank, in its "Week Ahead" report, suggested that any inflation rise of 1.1% or more for the quarter could be a tipping point for another rate adjustment. "The prospect of an August rate hike largely depends on the RBA’s preferred underlying inflation measure, the trimmed mean," the report noted. They forecast a 0.9% increase quarter-on-quarter and a 3.9% increase year-on-year for trimmed mean inflation.

Treasurer Chalmers also highlighted the government's initiatives aimed at curbing inflation, pointing to budget surpluses and prudent spending. He identified insurance, rent, and petrol prices as key components likely to influence Wednesday’s CPI figures - factors he stressed are outside government spending control.

While Australia contemplates another rate hike, other nations are shifting towards rate cuts as global inflationary pressures ease post-COVID-19 and following the shocks from the Ukraine war. For example, the Bank of Canada has recently reduced rates, and the US Federal Reserve might follow with a rate cut in September.

The RBA is scheduled to meet again on August 5 and 6 to determine any changes to the cash rate, influenced by the latest inflation data.

Additionally, Wednesday’s inflation outcome could have political ramifications ahead of the federal election. A recent RedBridge poll positions the Coalition ahead of the government on a two-party preferred basis, showing Peter Dutton’s Liberal National Party at 51.5% versus Labor’s 48.5%, a shift attributed to the escalating cost-of-living crisis affecting low and middle-income voters.

This article is adapted from content originally published by News Corp Australia.

Published:Sunday, 28th Jul 2024
Source: Paige Estritori

Please Note: If this information affects you, seek advice from a licensed professional.

Share this news item:

Finance News

Clear

ASIC's Review Highlights Concerns in Car Finance Practices

03 Dec 2025: Paige Estritori

The Australian Securities and Investments Commission (ASIC) has recently conducted a comprehensive review of the nation's motor vehicle finance sector, uncovering significant issues that raise concerns about responsible lending practices. The findings indicate that some consumers are being subjected to exorbitant fees and are defaulting on their loans shortly after approval. - read more

Cooling Trends Emerge in Australia's Used Car Market

03 Dec 2025: Paige Estritori

The Australian used car market, which experienced significant growth throughout most of 2024, has shown signs of deceleration in the final months of the year. This trend suggests a more cautious outlook for 2025, influenced by various economic factors and shifting consumer behaviors. - read more

ASIC Calls for Strengthened Consumer Protections in Car Finance

03 Dec 2025: Paige Estritori

The Australian Securities and Investments Commission (ASIC) has intensified its scrutiny of the motor vehicle finance sector, urging lenders to bolster consumer protections and enhance oversight mechanisms. This move comes in response to a notable increase in complaints regarding car finance arrangements and concerns about the adequacy of current lending practices. - read more

ASIC's Review Highlights Urgent Need for Reform in Car Finance Sector

25 Nov 2025: Paige Estritori

The Australian Securities and Investments Commission (ASIC) has recently conducted a comprehensive review of the motor vehicle finance sector, uncovering significant issues that adversely affect consumers. This investigation was initiated in response to a surge in complaints regarding high costs associated with car financing. - read more

CBA's AI Assistant Revolutionises Car Buying Experience

25 Nov 2025: Paige Estritori

The Commonwealth Bank of Australia (CBA) has unveiled an innovative AI assistant designed to transform the car buying process for Australian consumers. This cutting-edge tool aims to provide detailed information on vehicle costs and features, enhancing transparency and aiding buyers in making informed decisions. - read more

Click for more Finance News