Australia Q3 CPI Beats Forecasts and RBNZ Surprises With a Hold, Sending AUD/NZD to 13-Year High

Australia's September-quarter consumer price index came in hotter than expected on Wednesday, intensifying pressure on the Reserve Bank of Australia ahead of its November 3 meeting. Headline CPI rose 1.3% in Q3, above the 1.2% consensus and more than double the prior quarter's 0.6% gain. Annual headline CPI climbed to 4.3% in September, above the 4.2% forecast and up from 4.0%, while the Q3 all-groups annual reading came in at 3.9%, in line with estimates but down from 4.0%. The RBA's key trimmed mean measure rose 1.0% on the quarter, meeting forecasts but above the prior 0.8%, and printed 3.7% year on year, above the 3.6% consensus. The weighted median CPI rose 1.0% on the quarter and 3.6% annually.

RBA Governor Michele Bullock responded quickly, saying inflation is unacceptably high, that upside inflation risks are materialising, and that domestic demand continues to exceed supply. She added that labour market conditions appear tighter than the bank had previously estimated and that it is challenging to fully disregard supply shocks. Deputy Governor Hauser described the figures as meeting expectations but remaining elevated. Ahead of the print, ANZ and Westpac had tipped a November hike from the current 4.60% cash rate, while CBA and NAB expected a hold. The big four had pencilled in a trimmed mean of 0.9% to 1.0% against the RBA's own 0.8% projection. The stronger-than-expected headline number and Bullock's hawkish tone reinforced market expectations for tightening at the November 3 meeting. The Australian dollar rose 0.4% to $0.7053 immediately after the data.

In a simultaneous surprise across the Tasman, the Reserve Bank of New Zealand held its official cash rate at 2.75%, defying market pricing for a 25 basis point hike to 3.00%. The decision passed by a vote of four to three, with Governor Anna Breman, Carl Hansen, Prasanna Gai and Rebecca Williams voting to hold, while Paul Conway, Hayley Gourley and Karen Silk backed a hike. The New Zealand dollar fell more than 1% against the US dollar and dropped almost 2% against the Australian dollar, the largest single-session AUD/NZD move since 2017, pushing the cross to 13-year highs. The RBNZ minutes acknowledged that additional tightening is expected to be needed and that inflation expectations could become entrenched before standard indicators capture the shift, even after two prior OCR increases. Governor Breman said further rate hikes are probable at upcoming meetings, that the committee assessed market pricing alongside the economic outlook, and that a sustained decline in the New Zealand dollar could boost imported inflation. Incoming partial inflation data and employment figures were flagged as key inputs for the next decision.