Australian shares extended early gains on Wednesday to hover near a record high, after data showed inflation slowed by more than expected in the final three months of 2024, lifting the chances of an interest rate cut as early as next month.

The S&P/ASX 200 index rose as much as 0.9% to 8,476.2, close to the all-time high of 8,514.50 touched in early December, 2024. Before the data came, the index was up 0.4%.

Australia’s annual trimmed mean gauge of consumer prices rose 3.2% in the December quarter, according to data released by the Australian Bureau of Statistics.

This compared with an expected 3.3% gain.

The consumer price index held at 0.2% in the three months through December compared with 0.2% in the September quarter.

Australian shares flat as financials offset commodity, IT losses

Market participants were expecting a 0.3% rise.

“Q4 consumer price inflation data released this morning has shown further signs of cooling, setting the scene for the Reserve Bank of Australia to cut interest rates in February for the first time since November 2020,” said Tony Sycamore, analyst at IG Markets.

Heavyweight financials, which have reaped off significant profits in the recent past due to high interest rates, added 0.7%.

All the “Big Four” banks were trading in positive territory.

Lower interest rates, though are not positive for banks, help lift credit growth and the mortgage paying capacity of borrowers. Energy stocks gained 1.4% after oil prices rebounded from multi-week lows.

Sector majors Woodside and Santos gained 1.7% and 0.5%, respectively.

Miners added 0.2%, lifted by Whitehaven Coal after the country’s top independent coal producer posted a 92.7% surge in quarterly output.

Technology stocks tracked Wall Street higher, rising 2.2%.

Australia-listed shares of Block rose 4%, while Megaport added 0.1%.

In New Zealand, the benchmark S&P/NZX 50 index was up 0.1% at 12,971.95 points.