Australia inflation: Jim Chalmers downplays threat oil price rise ...

The treasurer said he would not preempt the RBA’s deliberations, but historically “what the Reserve Bank tries to do is to understand the overall direction of travel”.

“Quarterly inflation peaked before the election last year, in the March quarter, and in annual terms around Christmas time,” he said on ABC Radio.

“So the direction of travel has been really clear, inflation is moderating overall.

“We’ll get these bumpy and lumpy figures month-to-month from time to time, but it’s moderating overall and the direction of travel is pretty clear.

“We want it [to] moderate faster.

“But overall, I think the Reserve Bank would look at the fact that inflation has come off substantially since its peak last year.

“And if you look at some of the issues like consumption and household saving and some of these other data that they monitor closely, and I monitor closely, you can see that these interest rate rises that are already in the system are biting pretty hard.”

Inflation has moderated from a peak of 8.4 per cent in December, but the acceleration last month suggests a hoped return to the target of 2 per cent to 3 per cent, by late 2025 as the RBA forecasts could be volatile and not a straight line.

A 9.1 per cent surge in petrol prices last month was a significant driver of the rise in inflation in August.

Petrol prices have further galloped higher this month, and the average retail unleaded price hit $2.11 a litre last week, up from $1.80 in late June, the Australian Institute of Petroleum said.

Brent crude oil, the global benchmark, surged to $US96 ($151) a barrel on Thursday on depleting US reserves, and after Saudi Arabia and Russia agreed this month to extend production cuts to bolster prices.

“A faster depletion of inventories will keep upward pressure on oil prices,” ANZ analysts said.

Traditionally, the RBA ignores petrol prices in the short term and focuses on underlying inflation which strips out volatile movements in fuel and food costs.

One of the ABS measures of underlying inflation – excluding fruit and vegetables, automotive fuel, and holiday travel and accommodation – eased to 5.5 per cent, down from a 5.8 per cent rise in July.

The central bank has said it would watch inflation closely, as well as the labour market and household spending.

Ms Bullock, who became governor on September 18, said last month the RBA might need to raise interest rates again.

However, the RBA will be conscious that persistent strong fuel prices can spill into the cost of other goods and services, such as retail items transported to supermarket shelves. Fuel is a key input in the transport, logistics, manufacturing, mining and agriculture sectors.

Dr Chalmers said the government was not currently considering repeating a cut to fuel excise, which was temporarily slashed in half to 22¢ a litre for petrol for six months by the Coalition government from March 2022 leading into the federal election.

“It’s not something that we are currently contemplating,” Dr Chalmers said.

“One of the reasons for that is we’ve got I think, a much better way of providing cost-of-living help for people.”

“We are literally right now rolling out billions of dollars in cost-of-living support, and we’re doing that in a way that takes some of the edge off inflation rather than adding to it.”

At the May budget, the Albanese government handed out cost-of-living relief worth $14.6 billion over four years. This included increased welfare payments for the unemployed and single parents, one-off energy bill reductions for low- and medium-income households and businesses, and cheaper prescription medicines.