Interest rates look set to rise sooner rather than later as inflation surges to levels unseen in 20 years.
A big surge in inflation in the March quarter will place the Reserve Bank of Australia (RBA) under enormous pressure to follow its 2007 precedent and lift rates next week in an election campaign.
Annual inflation hit 5.1% after a higher-than-expected 2.1% rise in inflation in the three months to March. Inflation is now at its highest levels since the introduction of the GST more than 20 years ago, driven by rises in housing costs, fuel costs (which will start abating following oil price falls in recent weeks) and tertiary education.
The Australian Bureau of Statistics pointed out that supply chain issues are now having a real effect on inflation. «Continued shortages of building supplies and labour, heightened freight costs and ongoing strong demand contributed to price rises for newly built dwellings… Notable rises were also recorded across the food group (+2.8 per cent), reflecting high transport, fertiliser, packaging and ingredient costs, as well as COVID-related disruptions and herd restocking due to favourable weather.»