Inflation continues to inch upwards in Australia, driven by surging house prices, and quashing hopes of near-term interest rate reductions.
The Australian Bureau of Statistics (ABS) released its monthly consumer price index (CPI) for October on Wednesday, showing that both headline CPI and trimmed mean inflation continue to trend upward.
Headline CPI rose 3.8% in the 12 months leading up to October 2025, up from 3.6% in September.
Trimmed mean monthly inflation — which measures underlying inflation by stripping out goods with volatile prices changes and what many consider a better indicator of inflationary pressures — was 3.3% during the same time period, up from 3.2% in September.
The largest contributor to annual inflation was housing, up 5.9% in the year leading up to October, up from 4.7% in September. Annual services inflation was 3.9%, up from 3.5% in the year leading up to September, driven by rent, which was 4.2%, up from 3.8% the month before.
New dwelling prices grew to 1.7% in the year leading up to October, up from 1.5% in September, driven by fewer promotional offers and rising base rates from home builders.
By national capitals, Brisbane had the highest inflation rates, up 5.2% in October, followed by Perth, up 4.3%. Housing was also the biggest culprit by city. Housing inflation in Brisbane grew 12.4%, followed by 7.9% in Perth.
Markets were dismayed last month when the ABS released its quarterly inflation metrics, showing that inflationary pressures had reached their highest levels since December 2022.
The Reserve Bank of Australia (RBA) has slashed the official cash rate (OCR) three times so far in 2025, most recently in August. But the central bank has repeatedly made clear that it would not ease rates further until inflation was back within the central bank's target range of 2% to 3%.
September's quarterly figures showed inflation was moving in the opposite direction: CPI rose to 3.2%, up from 2.1% during the June quarter, while trimmed mean rose to 3% during the quarter.
"We got some pretty nasty numbers for the third quarter of 2025," Sally Auld, chief economist at NAB, said during a webinar attended by Australian Broker.
The economist pointed out that "all the different bits and pieces that make up inflation, all moved in a positive direction. I.e., they all went up in the quarter. And that's actually in itself quite unusual. Basically, in any given quarter, there's always a few components that will fall."
Not surprisingly, the RBA opted to hold interest rates at 3.6% during both its September and November meetings, driven by rising inflationary pressures.
That's disappointing news for mortgage holders, many of whom were hoping for some added relief amid Australia's persistent cost-of-living pressures.
Now, with the latest data in hand, market players are even more convinced that rates will likely stay put for the remainder of the year.
"The fact that we have a period that is going to feel a little bit uncomfortable for the Reserve Bank over the next couple of quarters, where inflation is sitting too high, probably means they won't be doing anything on rates. And they definitely won't be cutting rates," Auld said. "Because this is a central bank that will face into above-target inflation for the first couple of quarters, at least, of 2026. Basically a labor market that is fully employed. And a growth story where we're getting back to trend growth. So it's pretty hard to argue against that backdrop that this economy needs lower rates."
Over at ANZ, economists also expect the RBA to hold rates steady during its December meeting.
"The accelerating trimmed mean in recent months could keep the RBA on high alert, regarding re-emergence of inflation risks," said Adelaide Timbrell, senior economist at ANZ. "Today’s print supports our view that the RBA will hold in December, and increases the risk that the easing cycle has ended."
Trent Saunders, senior economist at Commonwealth Bank (CBA), echoed the sentiments, when he said: "The October CPI print was a bit stronger than anticipated. While the RBA remains focused on quarterly measures, this outcome reinforces our view that the cash rate will stay on hold for an extended period."
