Driven by strong global oil prices, the Australian Bureau of Statistics' import price index shows petroleum products jumped 14.6 per cent in the quarter and a staggering 79 per cent over the year.
The overall import price index was up 13.8 per cent for the year.
Earlier this week, the consumer price index for the December quarter unexpectedly jumped to 3.5 per cent, fuelled by petrol prices, to stand above the RBA's two to three per cent inflation target.
Importantly, underlying inflation - which smooths out wild price swings - also rose to 2.6 per cent, its highest level since 2014, and a level the Reserve Bank of Australia had not expected until the end of 2023.
The ABS export price index rose by a more modest 3.5 per cent in the December quarter, but was still a hefty 38.3 per cent up on the year.
Surging demand lifted coal export prices by 51.9 per cent in the quarter, while gas exports were 36.1 per cent higher, but a drop in demand for iron ore from China saw metalliferous ores and metal scrap prices down 29.4 per cent.
The rise in inflation and the recent drop in the unemployment rate has raised speculation among economists that the RBA could start lifting the cash rate in August.
But in the near term economists expect growth will be negatively impacted by the Omicron COVID-19 variant, briefly stalling the recovery from last year's Delta strain lockdowns.
Westpac has raised its growth forecast for the December quarter 2021 to 2.6 per cent from 2.2 per cent, partly reflecting the 12 per cent boost to retail sales in October and November as Delta strain lockdowns were removed.
"In contrast, our own high frequency credit and debit card data for the first few weeks of January is pointing to a marked fall in consumer spending over that period which can be attributed to the Omicron shock," Westpac chief economist Bill Evans said.
"With confidence-related spillovers to business investment and inventories in January we have marked down our forecast growth rate in the March quarter from a robust 2.3 per cent to zero."
Growth for the full year is now forecast at 5.5 per cent rather than 6.4 per cent.
The Westpac-Melbourne Institute leading index, which indicates the likely pace of economic activity three to nine months into the future, rose to minus 0.15 per cent in December from minus 19 per cent in November.
Mr Evans said the index remains in slight negative territory due to the high degree of uncertainty around the near-term outlook and the spectacular spread of the Omicron variant.
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