Why Inflation Isn't Finished Yet | Nucleus Investment Insights

by Nucleus Wealth Team

June 24, 2026

In this week’s podcast, Nucleus Wealth’s Chief Investment Officer, Damien Klassen, is joined by Leith van Onselen of MacroBusiness to examine why Australia’s inflation problem may be far from over — looking beyond the headline numbers to uncover the pressures still building beneath the surface. We explore what's driving persistent inflation, why hopes of a quick return to normal may be premature, and what a prolonged inflationary environment could mean for interest rates, markets, and investors.

Key talking points:

Current Inflation Trends: The latest CPI data shows underlying inflation in Australia has risen to 3.6%, significantly above the Reserve Bank's target range of 2-3%, indicating persistent inflationary pressures.
Labor Market Dynamics: Despite a slight decrease in the unemployment rate to 4.4%, the labor market data reveals a decline in hours worked and an increase in underemployment, suggesting underlying weaknesses.
Household Spending Insights: Recent data indicates that household spending has increased, driven by discretionary expenditures, even amid rising interest rates and declining consumer sentiment.
Energy Prices and Inflation: The potential reintroduction of fuel excise taxes will likely increase petrol prices, adding upward pressure on inflation, while falling domestic gas prices may help mitigate some inflationary effects.
Housing Market Challenges: Rising rents and construction costs continue to contribute to inflation, with a notable divergence between advertised rents and CPI rents, complicating the inflation outlook.
Productivity Concerns: Australia faces low productivity growth, exacerbated by a bloated non-market sector, which limits economic growth potential and contributes to inflationary pressures.
Investment Strategy Shifts: Given the outlook for sustained higher inflation, the discussion emphasizes the importance of adjusting investment strategies, favoring equities over government bonds to keep pace with inflation.
Geopolitical Risks: Ongoing geopolitical tensions, particularly in the Middle East and potential conflicts in Asia, pose risks to energy security and could exacerbate inflationary pressures in Australia.