Fuel prices have helped nudge inflation figures higher although the acceleration is probably not enough to spur the Reserve Bank into more interest rate action.
The Australian Bureau of Statistics consumer price index for August came in at an annual rate of 5.2 per cent, up from 4.9 per cent in July.
Annual growth in the indicator, which tracks the cost of buying the same basket of goods and services over time, was in line with market forecasts.
Most observers expected inflation to pick up again after higher prices at the petrol pump.
Automotive fuel prices rose a substantial 9.1 per cent in August and were up 13.9 per cent over the year.
Along with fuel prices, which fall under the broader transport category, housing, food and insurance were the other major drivers of the annual increase.
The overall housing category moderated a little, with new dwelling prices recording their weakest annual increase since August 2021 to reflect easing building material costs.
However, the tight rental market kept rents moving higher.
Treasurer Jim Chalmers believes the peak of inflation is in the rear mirror, even with higher fuel prices pushing up the monthly index.
“While inflation remains higher than we’d like for longer than we’d like, it is expected to continue to moderate over the year ahead,” he said.
Inflation was the primary focus of the government and its energy relief plan was taking the edge off power bill hikes, he said.
Shadow treasurer Angus Taylor said Australians were feeling the pain of higher energy, rent, insurance and fuel prices acutely.
The government should be doing more to rein in spending and take pressure off inflation, he said.
“Labor must treat inflation as priority one, two and three,” he said.
The ABS also pointed out inflation was moderating when volatile items – fruit, vegetables and fuel and holiday travel – were stripped out, sinking to 5.6 per cent from 5.8 per cent in July.
But the annual trimmed mean, a measure of underlying inflation that removes extreme prices changes, held steady at 5.6 per cent in August.
Services inflation also failed to moderate, holding on at 5.6 per cent in annual terms.
EY senior economist Paula Gadsby said the Reserve Bank was likely to look past the stronger fuel prices, given it was expected and featured in the minutes from the last board meeting, but services inflation would linger as a risk factor.
Data was still unfolding close enough to the RBA’s own forecasts to keep interest rates on hold in October, she said.
“But the Reserve Bank will be ready to pounce if productivity fails to improve and services inflation remains more persistent than expected,” she said.
“The risk of another rate hike remains, but our core expectation is that the Reserve Bank will sit tight.”
The quarterly inflation print, due in late October and after the next interest rate meeting, will give the RBA a more complete picture of the inflation challenge.