Australian shares rise as RBA governor warns inflation risks materialising

Australian shares made a modest gain on Friday, led by mining stocks benefiting from higher commodity prices, while the central bank's governor cautioned that inflation risks were emerging. The S&P/ASX 200 index climbed 0.3% to 8760.6 points by 0002 GMT, reinforcing its upward momentum for the third consecutive day. It was on track for its best week in three months, with an increase of approximately 0.2%.

Reserve Bank of Australia's Governor Michele Bullock noted that geopolitical tensions in the Middle East and the artificial intelligence boom were exerting upward pressure on prices. July's inflation rate exceeded expectations, suggesting a higher likelihood of additional rate hikes from the RBA, following the 75 basis points increase in borrowing costs this year.

Analysts predict the RBA will raise the cash rate by another 25 basis points in both September and November, citing factors such as the AI investment boom, surging oil prices, and the hawkish stance of global central banks against inflation as key drivers.

Markets indicate a 92% probability that the RBA will increase its 4.35% cash rate by 25 basis points at its forthcoming meeting on September 29. On the stock exchange, mining shares gained 1.6%, as iron ore and copper prices surged due to Chinese pre-holiday restocking activities. Nevertheless, the technology sub-index declined 0.8% for the week, marking its third successive week of losses.

BHP and Rio Tinto both rose by around 0.8%, while gold miners experienced a 3.2% boost, marking their best day in a month driven by strong bullion prices. Evolution Mining surged 2.8%, and Northern Star Resources rose by 2.2%.

Technology stocks also enjoyed a 0.6% increase, heading for a two-week peak after a rally on Wall Street. Megaport gained approximately 2.1%, and Codan added 2.7%. Meanwhile, New Zealand's benchmark S&P/NZX 50 index climbed 0.1% to 13,767.51 points.