Australians should prepare for sustained high inflation in the coming year, according to VanEck’s head of investments and capital markets, Russel Chesler. This warning comes as inflation climbed to 3.8 per cent in October. VanEck is an investment management firm that offers a range of exchange-traded funds (ETFs). The company aims to provide investors with access to a diverse array of investment opportunities.
Despite the ‘higher for longer’ tightening cycle and ongoing cost-of-living crisis, Chesler noted the Australian economy’s surprising resilience. He suggests that absent a sudden surge in either inflation or unemployment, the current economic landscape is likely to persist. Several factors are influencing Australia’s inflation trajectory.
Chesler pointed out that previous disinflationary factors, like falling goods prices and government subsidies, are waning. Meanwhile, persistent elements such as services, housing, and electricity prices continue to climb. Services inflation is of particular concern to the Reserve Bank of Australia (RBA), impacting a significant portion of the Consumer Price Index (CPI) basket. Strong wage growth and a tight labour market contribute to this challenge.
Housing inflation has also accelerated, driven by rising property values and historically low vacancy rates, pushing rental prices up nearly 44 per cent compared to five years ago. Electricity costs continue to exert upward pressure, increasing from a 33.9 per cent annual rise in September to 37.1 per cent in October, largely due to the expiration of energy rebates across state and federal governments. Chesler advised vigilance regarding rising inflation, especially given the RBA’s revised projections for an elevated inflation environment through 2026.
