Inflation continues to run hot Down Under, strengthening the case for more interest rates to come.
On Wednesday, the Australian Bureau of Statistics (ABS) released the latest consumer price index (CPI), revealing that both headline CPI and trimmed mean inflation are still above the Reserve Bank of Australia's (RBA) target inflationary range — and rising — despite attempts earlier this year by the central bank to curb pressure by way of higher interest rates.
In the 12 months leading up to September, headline CPI was 4.3%, up from 4.0% in the year to August. Meanwhile, trimmed mean inflation — which many economists consider a better indicator of inflationary pressures because it strips out goods with volatile price changes — was 3.6% in September, up from a revised 3.5% in August.
The main contributors were transportation, housing and education, up 8.7%, 5.2% and 4.7%, respectively, on a seasonally-adjusted basis.
While housing costs eased slightly, prices remain elevated. Housing increased 5.2% in the year, down from 5.7% in the 12 months to August. New dwelling prices rose 4.7% in the year, down from 5.4% the month before, largely driven by project builders raising base rates to pass on higher labour and material costs. Property rates increased 5.6% in the year to September, down from 6.2% in August. Rental prices rose 3.6%, unchanged since May 2026.
Electricity costs, meanwhile, were up 12.8%, partly because of the end of Commonwealth electricity rebates, while automotive fuel surged 23.6%, thanks to higher oil prices globally. Insurance costs rose 5.4%.
By city, inflation ran highest in Hobart at 5.3%, followed by Darwin at 5.2% and Adelaide at 5.0%. Canberra, Perth and Brisbane had inflationary rates of 4.7%, 4.5% and 4.4%, respectively. On the other end of the spectrum, Melbourne had the lowest inflationary rates at 4.0%, followed by Sydney at 4.3%.
The latest inflation data comes just one week ahead of the RBA's November meeting on monetary policy.
In September, the nation's central bank raised interest rates for the fourth time in 2026, bringing the official cash rate (OCR) to 4.60%, its highest levels since 2011.
While widely expected, the news was met with dismay by mortgage holders and business owners nationwide, many of whom are navigating a number of headwinds, including rising living and supply costs.
The RBA has repeatedly said that it will not lower interest rates until inflation is back within the target band of 2% to 3%. After the September decision, RBA Governor Michele Bullock made clear that the bank would raise rates again this year, "if that's what's needed to get inflation down.
"Our estimates suggest that it can take 12, sometimes, perhaps even 18 months in some sense, for the full effect of interest rates to come through," Bullock said at the time. "We've got to see how these four interest rate rises feed through."
Today's results likely won't help tame market fears.
"The conversations that we're having with people, they're not necessarily worried about inflation itself, as the specific word, but they're definitely worried from a repayment perspective: increasing interest rates every time, the impact, the repayments they're making on their mortgages. Some people are concerned about that," Alex Ritchie, director and mortgage broker at Sydney-based Strategic Asset and Equipment Finance, told Australian Broker. "Other people are getting battered so much at the moment with all the news and negativity and cost of living and everything else that another interest rate rise is just another hit to the stomach."
Ritchie said he expects another interest rate raise before the year is out, if not in November, then at the RBA's December meeting.
"It's a tricky, tricky balancing act that the RBA is doing at the moment," the broker said. "Inflation is still high, unemployment's creeping up, consumer sentiment is down, business confidence is down, business investment is down. On one hand, they've got to fight inflation. But on the other hand, it is definitely impacting the broader economy."
The RBA's next meeting on monetary policy is scheduled for 2 and 3 November.
