Australia's inflation rose at its fastest annual pace since 2014 in the December quarter as fuel and housing costs led broad-based price pressures, raising the prospect it will start raising interest rates soon.
Shortages of materials and labour are helping to drive high house prices around Australia. Photo: 123RF
The Australian Bureau of Statistics data showed the headline consumer price index (CPI) rose 1.3 percent in the fourth quarter and 3.5 percent for the year, topping forecasts.
The Reserve Bank of Australia's (RBA) favoured inflation measure jumped 1 percent in the quarter, the largest increase since 2008, pushing the annual rate to 2.6 percent.
The RBA has held out against scaling back its easy money policies on the view that inflation pressures were temporary and would abate.
"The RBA is all but certain to end its asset purchase scheme at its meeting next week," said Ben Udy, an economist at Capital Economics.
The rising cost of living, coupled with sky-high housing prices, is also shaping up to be a bone of political contention in a national election due by May.
The ABS noted a boom in home building combined with shortages of materials and labour to drive the largest increase in new dwelling prices in two decades.
Financial markets have been betting for some time the RBA was behind the curve on inflation and would have to raise rates soon.
A rise is expected by June, followed by three more moves by year's end.
Meanwhile, New Zealand's inflation rate is expected to hit a 30-year high when numbers are released later this week, which is expected to be followed by a string of rises in the official cash rate from the Reserve Bank of NZ through this year.
And investor nervousness about how aggressive the Federal Reserve might be in tackling US inflation, which has hit a 40-year high, has been a key factor in financial market turbulence in recent days.
The 'Fed' has its first meeting this week and is expected to signal it will start tightening policy later this year.
- Reuters / RNZ
