Australia’s headline inflation rate accelerated to 4.3 percent on Wednesday, according to data from the Australian Bureau of Statistics. The figures sharpened expectations of another interest rate rise when the Reserve Bank of Australia holds its next monetary policy decision on 3 November. Most economists are tipping a cash rate increase following the release.
The Reserve Bank of Australia’s preferred measure of consumer prices, known as underlying inflation, came in at an annual 3.6 percent to September. The cash rate already stands at 4.6 percent. This marks its highest level in 15 years after four rate hikes in 2026.
Appearing at Senate estimates on Wednesday shortly after the data was published, the central bank’s deputy governor, Andrew Hauser, described the inflation numbers as too high. He warned of a risk that longer term inflation expectations could pick up and make it harder to get inflation out of the system. We do not think it is necessarily crystallising yet, but it is a particular risk, Hauser told the hearing.
Housing costs and transport expenses drove the annual inflation figures higher. Housing, the single biggest category in the consumer price index, was the largest annual contributor after rising 5.2 percent. Builders have been passing on higher costs for materials and labour for new dwellings, while electricity prices also remain elevated.
Transport costs surged 8.7 percent over the past 12 months. This jump was driven largely by escalating fuel prices stemming from the conflict involving the United States, Israel, and Iran. Food prices also jumped another 3.2 percent over the year.
A fierce political debate has erupted in Australia over what is driving the cost-of-living squeeze. Critics pointed to a mix of high fuel prices, government spending, and poor productivity. Treasurer Jim Chalmers said on Wednesday that the government accepts its part in the fight against inflation, but blamed high oil prices and a recovering private sector for the main increases.
The most important thing that can happen for Australians under pressure is to see an end to this war in the Middle East, Chalmers told reporters. He added that the war has been disastrous for Australians, for the cost of living, and for inflation right around the world.
The latest figures show that costs for everyday goods and services are rising at the same time as unemployment lifts. Stephen Smith, a partner at Deloitte Access Economics, said the central bank has little appetite to allow inflation expectations to drift higher after such a prolonged period above target. He said the difficulty is that the economy is already slowing, with subdued household spending, a softened labour market, and a weakened housing market.
Josh Gilbert, a market analyst at eToro, said inflation is turning into a higher for longer story in the country. Anyone holding out for rate relief may need to pack plenty of patience, because another hike looks imminent after today, Gilbert said.
