Inflation for the month of August has come in at 3%, which is a jump from the pretty big 2.8% rise in July. So, newspaper headlines are accurately telling us that inflation is on the rise again, making another rate cut next week a non-goer.

Importantly, the main reason for this higher-than-desired inflation result isn’t debated — it’s all down to electricity prices and Australia’s commitment to not using coal to power our energy supply. It’s us doing what most of the world is doing to fight climate change that’s delivering us this higher inflation number.

This comes as President Donald Trump told the countries of the world in his UN speech that his administration supports fossil fuels and opposes renewable energy. “I’ve been right about everything, and I’m telling you if you don’t get away from the green energy scam, your country is going to fail,” he said.

While some economists are telling us that this result knocks out a chance of an interest rate cut next Tuesday when the RBA board meets, the fact is that a September 30 rate reduction wasn’t really expected anyway. While most economists thought Melbourne Cup Day on November 4 was a live chance for a cut, it largely depended on what was happening to underlying inflation (or the trimmed mean number) and whether unemployment is rising.

Headline inflation is less important to the RBA, but it’s the underlying inflation rate that cuts out one-off price-rising developments, such as the end of electricity rebates that explains why headline inflation spiked to 3% in August.

As Tony Galloway in The Australian noted: “The end of state power bill relief has sent electricity prices soaring 24.6 per cent over the year, fuelling the sharpest rise in inflation in 12 months and reigniting political clashes over the cost of living.”

For those praying for a rate cut, the focus has to be on the next quarterly inflation number, which is released on October 29. Then six days later we’ll be betting on a four-legged nag to win the Cup and hoping we also get a dividend from the RBA giving us a 0.25% cut.

Here, the underlying inflation rate will largely determine what happens, in company with the state of the jobs market.

Right now, Opposition leader Susan Ley is blaming the Albanese Government for mismanagement of the economy. Certainly, if Treasurer Chalmers had been stingier with tax cuts, the economy would be weaker. While this would have suppressed the demand-creating aspects of inflation, the cost of being green with our energy would still have added to inflation.

Of course, if Labor had given less tax cuts, the economy would have created fewer jobs and unemployment would be higher, and then those who have a mortgage and a job would be enjoying lower interest rates.

In New Zealand, they played harder with interest rate rises and gave less tax cuts, so total unemployment has gone from 3.3% to 5.2%. And yep, they went into a recession.

Source: NZ Government

Deputy Chief Economist at AMP, Diana Mousina, has looked at these numbers and points out that the current 2.6% trimmed mean figure is just above what the RBA wants at 2.5%, which is pretty good. Throwing in a still slower-than-expected economy, the AMP economics team expects a 0.25% rate cut in November and two more in February and May next year.

While I hope these guys are on the money, we’ll need to see inflation (both headline and underlying) head downwards because I can’t see the Albanese Government taking the advice of Mr Trump to go back to coal and “drill, baby, drill” for oil.