Australian mortgage holders face the prospect of another interest rate rise after inflation for July came in higher than economists had expected, fuelling concerns that the Reserve Bank of Australia (RBA) will need to tighten policy further. The Australian Bureau of Statistics reported that headline inflation eased slightly to 3.5 per cent in the year to July, from 3.8 per cent in the year to June, but this was well above the 3.2 per cent forecast and remains above the RBA's target band of 2 to 3 per cent. Economists warned that the apparent easing was misleading, as it largely reflected a high reading from a year earlier dropping out of the calculation rather than a genuine cooling of price pressures.

Housing, food and non-alcoholic beverages, and recreation and culture were the largest contributors to annual inflation, rising 5 per cent, 3.2 per cent and 2.6 per cent respectively, while the RBA's preferred trimmed mean measure held at 3.6 per cent annually. AMP chief economist Shane Oliver described the figures as "way too high" and said they strengthened the case for a rate hike. Additional pressures include a 4.75 per cent minimum wage rise from 1 July, higher fuel costs linked to a 16-cent fuel excise increase and Middle East conflict-driven oil prices, and concerns raised in RBA board minutes about elevated market services inflation.