Australia: Inflation climbs to multi-decade tops – UOB

Economist at UOB Group Lee Sue Ann assesses the latest inflation figures Down Under.

Key Takeaways

“Both headline and underlying inflation for 3Q22 came in higher than expectations. We believe inflation will likely peak in 4Q22, in the absence of further significant global shocks. Our current full-year inflation forecasts of 5.8% for 2022 and 3.9% for 2023 remain unchanged.”

“While the labour market remains resilient, the outlook for labour demand is weakening. Labour supply, on the other hand, is increasing on the back of the rebound in migration. These factors will likely push up the unemployment rate in coming months towards the 3.8%-4.0% levels.”

“The latest Federal Budget, unveiled on 25 Oct, displayed strong fiscal discipline, which is crucial and consistent with the Reserve Bank of Australia (RBA)’s efforts to curb inflation. The next RBA meeting is on 1 Nov, and we are penciling in a 25bps hike in the official cash rate (OCR) to 2.85%.”