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Australian inflation in July and August surges at the fastest pace since 1990

Borrowers WILL cop another big interest rate rise next month as inflation surges at the fastest pace since 1990

  •  Inflation surged by 7 per cent in year to July and 6.8 per cent annually in August
  • This was the highest annual headline inflation reading since December 1990 
  • This makes the Reserve Bank of Australia most likely to raise rates in October 

Australian borrowers are set to face another big interest rate increase with inflation surging at the fastest pace since 1990.

New Australian Bureau of Statistics data showed the consumer price index climbing by 7 per cent in the year to July and by 6.8 per cent annually in August.

This was the fastest pace of headline inflation since December 1990 during the first Gulf War, with residential construction costs last month rising by 20.7 per cent over the year as petrol prices soared 15 per cent despite a temporary halving of fuel excise.

Inflation is well above the Reserve Bank of Australia’s 2 to 3 per cent target, which means borrowers are more likely to be dealt with another big 0.5 percentage point rate rise in October.

Borrowers since May have already copped five straight monthly interest rate rises, taking the cash rate to a seven-year high of 2.35 per cent. 

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Australian borrowers are set to face another big interest rate increase with inflation surging at the fastest pace since 1990 (pictured is a Melbourne auction)

Another 50 basis point increase next month would take the cash rate to a nine-year high of 2.85 per cent.

Borrowers in just five months have endured the most severe interest rate rises since 1994 but another 50 basis point increase would mean Australians would be copping the strictest pace of monetary policy tightening since the RBA began publishing a target cash rate in 1990. 

The latest inflation data is the first monthly release from the ABS after Reserve Bank governor Philip Lowe in June was laughed at during a conference in Zurich when he told fellow central bankers Australia still only released consumer price index data every three months.

‘The other thing that’s different – and this is a bad difference – is our CPI is only available quarterly,’ Dr Lowe said then.

‘Yes, you laugh as well.’

The United States, UK and Canada publish monthly inflation data but Australia and New Zealand still only release quarterly inflation data.

Australia’s quarterly ABS series dates back to 1949.

But from October 26, a monthly consumer price indicator will be published alongside September quarter inflation data.

The Reserve Bank and Treasury are both expecting headline inflation, also known as the consumer price index, to hit a 32-year high of 7.75 per cent in 2022. 

A series of rate rises have so far failed to deter consumer spending with retail turnover in August rising by 0.6 per cent – the eighth consecutive monthly increase.

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Read more at DailyMail.co.uk