Australian Inflation Expectations Climb to Six-Month High

The four-week moving average for inflation expectations also climbed to 6.1%, confirming a trend that has prompted warnings from RBA Deputy Governor Andrew Hauser. Hauser recently described the inflation outlook as having turned materially worse, noting that businesses are increasingly comfortable passing rising costs directly to consumers. This behavior fuels concerns that elevated price expectations are becoming entrenched in the economy.

Financial markets are now focused on Wednesday’s third-quarter inflation report. Any data suggesting persistent price growth would likely solidify expectations for a fifth interest rate hike this year. While the RBA targets inflation at 2.5%, current figures hover near 4.0%. Beyond the inflation data, consumer confidence remains near record lows at 67.9 points. Households are grappling with the combined burden of high interest rates, elevated fuel costs, and declining property values. With the index for buying major household items dropping 6.3 points, further monetary tightening risks accelerating the cooling of the housing market and potentially increasing business failures.