Treasurer Josh Frydenberg believes inflation in Australia has been a lot more moderate than in other countries, despite last week's figures showing a spike in price pressures.
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"I don't believe the inflation genie is out of the bottle," Mr Frydenberg told Sky News on Wednesday.
"I do believe a number of the contributing factors, like supply chain constraints, are actually transitory in nature - that's the expectation at least from many economists."
Financial markets and some economists have been speculating on a possible interest rate rise as early as next year after underlying inflation, which smooths out volatile price swings, jumped to 2.1 per cent.
This was the strongest result in six years and took the rate to within the RBA's two to three per cent inflation target.
But Reserve Bank Governor Philip Lowe has attempted to dampen such speculation that a rate hike is on the horizon anytime soon.
Dr Lowe says while an earlier hike in the cash rate is now "possible" after having a long-held view that it would remain unchanged until 2024, he thought talk of a move next year was a "complete overreaction" by markets to last week's inflation figures.
"I'm not sure how we would get to that state of the world and be in a position to raise rates early in the new year. I still struggle with the scenario that rates would need to be raised next year," Dr Lowe told a rare post-board meeting webinar on Tuesday.
The bank's latest forecast is that underlying inflation will be no higher than 2.5 per cent at the end of 2023.
Deloitte Access Economics partner Chris Richardson agrees that an interest hike is still some way off, saying 2023 "sounds eminently sensible".
"Unless and until wage growth in Australia doubles from its record low the Reserve Bank has nothing to sweat about," Mr Richardson told Sky News.
Wage growth currently sits at 1.7 per cent, well short of the three per cent rate Dr Lowe wants to achieve.
Meanwhile, approvals for the building of new houses tumbled in September as the impact of the federal government's successful HomeBuilder grants scheme unwound.
The Australian Bureau of Statistics said private sector house approvals sank 16 per cent in September to 10,168 for the month.
"Today's data confirm that the surge in new house approvals spurred in part by policy support over the pandemic is fading, but new approvals still remain elevated relative to pre-pandemic levels," National Australia Bank's Taylor Nugent said.
Despite the large fall in September, the series remains 18.2 per cent higher than the pre-pandemic level in September 2019.
Total dwelling approvals fell 4.3 per cent in September to 18,090, while the more volatile approvals excluding houses component jumped 18.1 per cent to 7686.
Separate figures showed Australia's construction industry is showing signs of a strong recovery after being hit by the lengthy coronavirus lockdowns in NSW and Victoria.
The Australian Industry Group-Housing Industry Association performance of construction index increased by 4.3 per cent to 57.6 in October, comfortably above the 50-point mark that separates expansion from contraction.
"The healthy leap in activity levels across the Australian construction sector in October is a taste of what is expected to be a strong rebound for the broader economy over the next few months," Ai Group chief policy adviser Peter Burn said.
Australian Associated Press
