Inflation hotter than expected means RBA rate hikes back on the cards | The Business | ABC NEWS

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Inflation fell to 4 per cent in the year to May, but the measure the Reserve bank watches ticked up to 3.6 per cent. The Treasurer Jim Chalmers says the Iran war keeps pushing inflationhigher. "The trimmed mean measure reflects these broader price pressures we have identified for some time including in a budget, coming from and made worse by the war in Middle East." Over the past 12 months, power prices surged 21 per cent as energy rebates were used up. Rents and the cost of building new homes accelerated, as did food, driven by high prices for lamb, beef and diary products. The cost of filling up at the petrol pump was one bright spot. Fuel prices rose but fell in the month because of the excise cut and lower oil prices.

The problem for the Reserve Bank is that underyling inflation keeps moving in the wrong direction and further away from its target band of between 2 and 3 per cent. It means that households and businesses already under the pump could be in for further financial pressure. Economists are not ruling out another RBA interest rate hike.

KPMG's chief economist Brendan Rynna said the new inflation figures "will put the Reserve Bank on notice to increasing interest rates next meeting in August.

And economist David Bassanese sees the risk of recession ahead. "If we get a major pullback in consumer spending and a contraction in housing investment following some of the budget changes, that could be enough to tip the economy over."

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