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Consumer price increases accelerated in the June quarter, with the CPI rising 1.5 per cent over the previous three months, to be 4.5 per cent higher than a year earlier. Economists had been tipping gains of 1.3 per cent and 4.3 per cent, respectively.
A string of weaker economic figures in recent weeks had raised hopes that interest rates at 12-year highs had done enough to cool demand and contain inflation. Some economists had also begun tipping a rate cut by the year's end, while markets had been pricing in the prospect that rates might be lower this time next year.
Today's CPI data and complementary figures released by the Reserve Bank suggest those rate cut hopes may be premature.
The springboard for today's CPI jump included food and fuel prices. Even the RBA's preferred inflation gauges, which strip away the largest price movements, increased to be well above its target range of 2 per cent-3 per cent.
The Australian dollar traded at about 97.2 US cents prior to the release of data by the Australian Bureau of Statistics and the RBA, and will probably rise as investors bet Australian interest rates will remain relatively high for longer, compared with counterparts overseas.
New Zealand's Reserve Bank decides whether to lower Kiwi rates tomorrow. It too faces higher rates of inflation than it would be comfortable with.