Australian inflation and cost dynamics

Examining international, consumer and producer prices and wages

Inflation pressures in Australia have rebounded in the September quarter, with headline inflation surging above the RBA's target range for the first time in over a year. While supply pressures remain persistent - particularly in energy, demand-side factors have strengthened after a period of subdued consumption.

KPMG expects inflation will remain contained despite its recent rebound and broader momentum. With electricity prices being the largest contributor to the recent inflation shock, the significant drop in wholesale electricity prices is encouraging and should flow through to retail energy costs in the near term. We also believe the current cash rate remains restrictive, which will dampen private sector demand. Coupled with modest economic growth prospects and a gradual easing in labour market conditions, wage growth is expected to cool. 

However, as global trade uncertainty and geopolitical tension continue, the outlook for inflation remains mixed with potential for further volatility in the months ahead. 
 

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