Petrol to fuel renewed inflationary pulse: Treasury

Economists warned inflation could climb again in the September quarter and potentially could pave the way for another interest rate hike as early as Melbourne Cup day.

Fuel costs jumped by more than a third in the September quarter to $2.10 a litre for unleaded petrol in early October. Picture: NCA NewsWire/Tertius Pickard

Surging petrol prices will drive inflation higher by a quarter of a percentage point in the three months to September, Treasury says, as economists warn that an unwelcome acceleration in consumer price growth could pave the way for another interest rate hike as early as Melbourne Cup day.

Fuel costs jumped by more than a third in the quarter to above $2.10 a litre for unleaded petrol in early October – nearly on par with the heights reached following Russia’s invasion of Ukraine last year.

Ahead of a key quarterly inflation report on Wednesday, Jim Chalmers on Sunday foreshadowed that the rapid rise in prices at the bowser had put “additional upward pressure” on inflation.

“And, obviously, events in the Middle East risk putting further upward pressure on global oil ­prices when people can least ­afford it,” the Treasurer said.

As Anthony Albanese flew to Washington to meet with US President Joe Biden, Dr Chalmers reiterated that the government’s “highest priority is rolling out ­billions of dollars of support for people under cost-of-living pressure”.

Opposition Treasury spokesman Angus Taylor slammed the Prime Minister for ignoring the growing toll on everyday Australians from the growing burden of high and rising prices and soaring interest rates.

Writing in The Australian, Mr Taylor said only the “right agenda” of smaller government, lower taxes and deregulation could bring inflation and interest rates down.

Mr Taylor said Labor had to start “listening to the voices of aspirational Australians”. He also accused Dr Chalmers of “destabilising” the Reserve Bank by imposing an overly ambitious definition of full employment that would make it harder for the central bank to fulfil its mandate.

“If he (the Treasurer) is happy to increase employment at the expense of accelerating inflation, he should say so,” Mr Taylor said. “I doubt most Australians are up for that trade off with the obvious exception of some union officials.”

Mr Taylor called on fiscal policy to do more to assist the RBA’s monetary tightening, accusing Labor of spending an extra $188bn since coming to power. “High commodity prices papering over the cracks of a big-spending government won’t cut it,” he said.

With labour productivity in reverse, he said the government should “free up workplaces rather than stifling them with new regulation … You couldn’t pick a worse time to make industrial relations interventions that undermine the ability for worker and employee to come up with solutions that are good for both.”

Shadow Treasurer Angus Taylor. Picture: Monique Harmer/NCA NewsWire

Mr Taylor also described Dr Chalmers’s determination to harness the nation’s superannuation savings for nation-building projects as “crony capitalism”.

“Labor’s willingness to work with politically aligned bosses to shut out competitors is the very worst of the old-style corporatist big union, big business and big government triumvirate that will steal from the wallets of hardworking aspirational Australians,” he said.

The consensus among economists is that Australian Bureau of Statistics figures midweek will show annual consumer price growth fell from 6 per cent in the year to June to 5.4 per cent in September. While the predicted outcome would confirm a slowing trend since the peak of near 8 per cent in December, some analysts say climbing petrol prices will drive the quarterly rate of inflation from 0.8 per cent in June to 1.1 per cent in the latest numbers.

A quarterly outcome much above 1.1 per cent would make uncomfortable reading for RBA governor Michele Bullock and her board, who are aiming to return consumer price growth to within the 2-3 per cent target range by late 2025.

RBA board members have emphasised a “low tolerance” for inflation straying from this path.