FEAR & GREED | Business News What inflation (and interest rates) will do this year
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Jan 12, 2026 In this insightful discussion, Luci Ellis, Westpac's Chief Economist known for her macroeconomic expertise, reveals the unexpected twists in Australia's inflation landscape. She delves into whether recent inflation spikes are temporary noise or longer-lasting trends. Luci also highlights surprises from recent CPI data and warns about the impact of regulated price increases on businesses. With a cautious outlook, she shares Westpac's projections for interest rates, signaling stability through 2026 unless inflation takes another turn.
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Inflation Not Fully Defeated
- Inflation hasn't gone away and a positive inflation rate is expected due to the target.
- Recent September and October readings were higher than expected, prompting caution about persistence.
Regulated Prices Driving Headline CPI
- Many high CPI components are regulated or administered prices rather than market-driven items.
- These include electricity, water and council charges, which can push headline inflation higher temporarily.
Administered Costs Can Feed Through
- Regulated price increases can be passed through into other businesses' cost bases and sustain inflation.
- But these rises don't necessarily signal strong demand-driven inflation requiring immediate hikes.