One of America's top economists has warned of a 'gathering storm' of inflation in a dire prediction of spiralling prices which would severely hit Australian consumers.
Former United States treasury secretary Larry Summers has been warning of the risks of the world's largest economy overheating since February and is even more concerned now.
Record-high petrol prices and leaping rents are causing an Australian inflation surge with new proof of living cost pressures revealed after Twitter billionaire Jack Dorsey issued a 'hyperinflation' warning.
Australia's headline inflation rate grew by 3 per cent in the year to September with the consumer price index at the top end of the Reserve Bank's 2 to 3 per cent target band.
One of America's top economists has warned of a 'gathering storm' of inflation, in a dire prediction of spiralling prices which would severely impact Australian consumers
Former United States treasury secretary Larry Summers has been warning of the risks of the world's largest economy overheating since February and is even more concerned now
Professor Summers, a former chief economist of the World Bank and treasury secretary under president Bill Clinton, said he had been surprised by how rapidly inflation had accelerated.
'I'm afraid things have come in worse than I expected on inflation,' Professor Summers told the ABC's The Business program.
He said rising demand for products, supply bottlenecks and 'savings overhang' combined with fiscal and monetary policies meant 'eventually the bathtub was going to overflow'.
'I think we now have a gathering storm of inflation and we're likely to see some combination of that storm coming to fruition or the central bank being forced to act to contain inflation with potentially serious financial consequences or some combination of those two things.'
'I hope I turn out to be wrong and certainly markets are still expecting that I'm going to turn out to be wrong but my sense is that the preponderance of risk is very much on the side of overheating.
'Rates could go up a fair amount with a fair size consequence for asset prices. So I think that we're looking at a pretty unstable financial environment.
Record-high petrol prices and leaping rents are causing an Australian inflation surge with new proof of living cost pressures revealed after Twitter billionaire Jack Dorsey issued a 'hyperinflation warning'
'When you have more spending chasing less supply that’s when you tend to have an inflationary dynamic develop, and I think that is a real cause for concern.'
Surging petrol prices were the biggest contributor to Australia's latest inflation figures, with fuel prices up 7.1 per cent in the quarter.
The figures were taken before unleaded prices this month surged to new record highs.
The official data showed unleaded prices at 153.5 cents a litre during the September quarter but as of this week, bowser prices in Sydney and Melbourne had soared to record highs above 172 cents a litre.
In Adelaide, average petrol prices have soared above 180 cents a litre.
The Australian Bureau of Statistics has revealed the extent of the price rises hours after real estate data group CoreLogic revealed national rents in September soared by 8.9 per cent to $485 a week, the fastest annual growth since July 2008.
The official data showed unleaded prices at 153.5 cents a litre during the September quarter but as of this week, bowser prices in Sydney and Melbourne had soared to record highs above 172 cents a litre. In Adelaide, average petrol prices have soared above 180 cents a litre (pictured is a stock image)
In regional areas, rents surged at an annual pace of 12.5 per cent, the fastest annual pace in records going back to 2005.
Regional rents are now at $452 compared with $500 in capital cities, following a 7.5 per cent annual increase.
New evidence of price
