There will be huge pressure on the Reserve Bank to increase interest rates in November (on Melbourne Cup Day) and potentially again in December after inflation rose again in September.

The RBA Governor has told a Senate Inquiry that inflation is likely to be elevated for some time and said that “a further period of subdued growth of aggregate demand is needed to reduce capacity pressures and bring down inflation.”  Master Builders NSW CEO Matt Pollock said that “high inflation and the RBA Governor’s comments that ‘growth needs to slow’ further shows the price we continue to pay for anaemic productivity growth”

Matt Pollock went on to say that it’s unfair that the construction industry and households must pay the price for the failure of the Federal Government to get inflation under control. “They didn’t print, borrow or spend the money that is driving up inflation” he said.

The latest Consumer Price Index (CPA) data released by the ABS shows that headline inflation rose to 4.3% in September up from 4% in August due to nearly 10% (9.4%) rise in fuel prices. Underlying inflation also rose to 3.7% in September up from 3.6% in June,

Of major concern is housing which is the other major source of inflation, with persistent supply shortages and elevated construction costs driving rents up 3.6% over the past 12 months and the cost of building a new home 4.74.7%higher.

The RBA and other economists largely reject the Federal Government’s attempts to blame the Middle East conflict and increasing fuel prices for the country’s worsening economy. Deloitte Access Economics Partner Stephen Smith echoed the RBA Governor’s comment that Australia’s inflation problem is mostly “home grown.”