The flow on impact of this could spell bad news for squeezed mortgage holders, who are continuing to hold out for much-needed repayments relief from rate cuts.

“If the data that we’re seeing and the information we’re getting suggests that inflation is picking up again, then that would be a very big red flag for us,” Ms Bullock warned at a Committee for Economic Development of Australia event in Sydney on Thursday.

While headline inflation eased to 2.8% over the year to the September quarter of 2024, down from 5.4% over the year to the September quarter of 2023, the trimmed mean number came in at 3.5% in October, up from 3.2% in September.

Predictions for a rate cut as soon as Christmas just a few months ago have now shifted to as far back as mid-2025. The cash rate currently stands at a 13-year high of 4.35%.

Ms Bullock said there is “some way to go to return inflation sustainably within the 2–3% target range”.

“If we fail to bring inflation down in a sustainable way, cost-of-living pressures will only compound and monetary policy would need to remain restrictive for longer. This is why returning inflation sustainably to the target within a reasonable timeframe remains the board’s highest priority.”

The governor warned labour market conditions are “unusually tight” in Australia.

“Given the tightness, along with our assessment that the level of demand still exceeds supply in the broader economy, we expect it will take a little longer for inflation to settle at target.”

Mortgage holders across Australia are battling through a sustained cost-of-living crisis, with many having never experienced an inflationary environment before.

Australian home prices are now 5.62% higher than a year ago, PropTrack data shows. Prices in the combined capital cities have increased 5.85% over the past year.

“People are saying interest rates are hurting, but the thing that is really hurting is inflation,” Ms Bullock said. “Inflation is hurting absolutely everyone, and so we need to get that under control.

“A of people in Australia have never experienced inflation before. We haven’t had any in 30 years so it’s no surprise really that people are hurting, and they’re really shocked by all of this.”

Sourced from realestate.com