Annual inflation has jumped to 1.3 per cent, an unexpectedly strong result, the Australian Bureau of Statistics reported on Wednesday.

The consumer price index for the September quarter rose by 0.7 per cent, beating the market expectation of 0.5 per cent.

This pushed up the twelve-month figure from a 1 per cent low in the June quarter, the weakest since 1999, to 1.3 per cent.

Price growth was strongest in July-September for food and non-alcoholic beverages (1.7 per cent increase), alcohol and tobacco (1.1pc), housing (1pc) and clothing and footwear (0.3pc).

The result was better than analysts expected, as low inflation is a symptom of slow economic growth.

But it was still below the Reserve Bank’s target.

The central bank pays close attention to inflation data when it sets the official cash rate, which impacts borrowing costs for mortgages, credit cards and many other financial products.

Since the early 1990s, the RBA has attempted to keep the headline, annualised inflation figure at about 2-3 per cent over the “medium term”.

This result could still be an incentive to cut interest rates further, but most analysts see this as unlikely.

The RBA held the official interest rate at 1.5 per cent at its October board meeting — the lowest in Australian history. The rate was cut by 25 basis points in May and again in August.