Stubborn inflation surge crushes hopes of any early interest rate cuts

Australian families face further financial pain as surging housing and electricity costs push inflation to 3.8 per cent, potentially delaying rate relief until 2027. See why.

Prices are up 3.8 per cent over the past year.

That means there won’t be another interest rate cut for a long time.

It could be 2027 before there’s further relief on the home loan front, if you believe Matt Comyn of CBA, which is the biggest lender in the nation.

The Reserve Bank of Australia will keep the brakes on – in a bid to slow demand – until inflation readings are consistently well under three per cent.

The RBA has put the brakes on rates due to higher inflation.

RBA Governor Michele Bullock would like to be able to ease monetary policy to support anaemic growth, but she can’t because taming inflation is her highest priority.

In the latest figures from the Australian Bureau of Statistics, the biggest contributor to inflation is housing.

Within that category, the main drivers are electricity prices and rents.

That should be an embarrassment for any government.

Mortgage relief for Australians is years away, CBA boss Matt Comyn has warned. Picture: Dan Peled / NewsWire

And it is set to get worse, because the federal energy bill rebate – which has been artificially lowering retail electricity costs – is about to end.

The asterisk there is that Anthony Albanese and Jim Chalmers could yet choose to spend further billions of dollars of taxpayer money to extend subsidies into 2026. We don’t know yet, but in his comments on inflation, Dr Chalmers didn’t sound like he was planning on an extension.

Federal Treasurer Jim Chalmers. The cost of electricity and rents should be an embarrassment for the government, writes John Rolfe. Picture: NewsWire / Martin Ollman

The next biggest contributor after housing was food and non-alcoholic beverages. These are, literally, bread and butter components of a typical budget. Unavoidable, non-discretionary expenses that are still going up after years of steep increases.

Health, which has relatively small weighting in the overall CPI, was up four per cent over the past year; education costs added another 5.4 per cent.

The cost of living just keeps on escalating. At the same time, wages aren’t growing as strongly as they were. That’s a bad combo.

Originally published as Stubborn inflation surge crushes hopes of any early interest rate cuts