Australian Inflation Jumps 1.3% Quarterly, Putting Next Rate Decision Under Scrutiny
Key Facts
Australia’s consumer price index rose 1.3% in the third quarter of 2026, compared with a 0.6% increase in the second quarter, according to the Australian Bureau of Statistics. September data showed annual inflation at 4.3% in the 12 months through that month, up from 4.0% in August. The annual trimmed mean also rose to 3.6% from 3.5%. The reading comes ahead of the Reserve Bank of Australia’s Monetary Policy Board meeting scheduled for 2 and 3 November. Continued price increases put the inflation outlook at the center of the monetary policy debate, after the bank said inflation remained elevated.
On a monthly basis, the consumer price index rose 0.8% in September before seasonal adjustment and 0.6% after it, according to the bureau. That means the pace of prices during the month accompanied the quarterly increase and annual rise, while the quarterly trimmed mean was 1.0%, according to the bureau’s correction to the draft version. The trimmed mean is a separate measure of underlying inflation from the headline reading, and its annual rate rose compared with August. Deputy Governor Andrew Hauser said on 21 October that the inflation outlook was "much worse than we expected in the August report." He added that the quarterly underlying figure was likely to exceed the report’s assumptions unless a major downside surprise emerged in the final month of the quarter.
Transport was the leading contributor among rising price groups, with annual inflation of 8.7% through September, driven largely by automotive fuel, which rose 23.6% year on year. In September alone, fuel prices rose 9.4%, with the bureau attributing the monthly increase to higher global oil prices. The bureau said, "Automotive fuel prices rose 9.4%, driven by higher global oil prices." These figures link some price pressures to energy costs, which are also reflected in household expenses. Fuel’s impact remains one component of the acceleration in the latest price index, alongside housing items.
Housing prices rose 5.2% annually through September, while electricity increased 12.8% and rents rose 3.6%. The bureau attributed the annual increase in electricity largely to the end of government electricity rebates during the year. The bureau said, "The 12.8% annual increase in electricity costs is largely due to the end of government electricity rebates." Housing costs add another source of price pressure alongside transport and fuel, with rents continuing to rise year on year. These components show that September inflation included energy and housing expenses, as well as the increase recorded in the overall index.
The bank had raised its cash rate target by 25 basis points to 4.60% on 29 September, with the current level taking effect on 30 September. Its board said at the time that "inflation remains elevated, and some of the upside risks flagged in August are materialising." In the minutes of its September meeting, members said the latest inflation result exceeded expectations and businesses had reported broad cost pressures, some of which they had passed on or intended to pass on to goods and services prices. The bank also said in its August report that trimmed mean inflation was expected to remain above 3% through mid-2027, before declining to 2.5% by early 2028. Hauser said energy pressures, demand linked to artificial intelligence and domestic capacity constraints were among the upside risks the bank was monitoring.
In foreign exchange markets, the Australian dollar’s close against the U.S. dollar rose to 0.70535 on 28 October, from 0.70247 the previous day, according to EL7 data. The move follows the release of inflation data, as investors await the bank’s meetings and upcoming price data. The producer price index for the quarter ended in September is scheduled for release on 30 October at 11:30 a.m. Sydney time. The Monetary Policy Board meets on 2 and 3 November, with its policy decision and statement due on 3 November at 2:30 p.m. Sydney time. The bank said the board would continue to monitor data and risks and could raise the cash rate target further if necessary.