By James Glynn


SYDNEY – Australian consumer prices rose at a much faster pace than expected in the third quarter, raising concerns that the Reserve Bank of Australia may have to raise interest rates more than expected.

Consumer prices rose 1.8% quarter on quarter and 7.3% year on year, its fastest pace since 1990, the Australian Bureau of Statistics said on Wednesday.

Economists had forecast inflation to hit 1.6% in the quarter and 7.0% for the year.

Trimmed average inflation was also higher than expected at 1.8% for the quarter, compared to an expected rise of 1.5%, the ABS said.

Trimmed average annual inflation was the highest since the series began in 2003, rising 6.1% from 4.9% in the second quarter.

The data should make the RBA uneasy after opting to slow the pace at which it raised official interest rates this month, signaling to markets that the rapid increases since May represented a significant policy tightening.

The RBA had raised the rate by 25 basis points this month, slowing from the 50 basis point increases that had marked previous months.

Attention would now turn to the RBA’s policy meeting next week for evidence of a change in its guidance or a possible reacceleration in the pace of interest rate hikes.

The RBA joined other major central banks, including the Reserve Bank of New Zealand, which had to absorb news of surprisingly high inflation results.

The main contributors to the rise in inflation during the quarter were the cost of new homes, which rose 3.7% from the second quarter, and gasoline prices, which rose 10, 9% over the same period.

Labor shortages in the home construction industry, leading to higher labor costs, contributed to higher new housing costs this quarter, the ABS said.

Still, the pace of new home price growth has slowed from recent quarters, reflecting a slowdown in new demand and some easing of supply constraints, he said.

Annual gas price reviews in the states and territories helped pass on higher wholesale gas prices to consumers in the third quarter.

Electricity prices rose 3.2% from the second quarter, as nationwide increases were offset by state government credits to consumers.

Excluding the effect of these government measures, electricity prices would have increased by 15.6% in the third quarter, the ABS said.

Food prices rose 3.2% in the quarter, while fruit and vegetable prices also rose sharply, reflecting rising input costs and weather-damaged crops.

Gasoline prices fell 4.3% in the third quarter, the ABS added.


Write to James Glynn at james.glynn@wsj.com