Australian Inflation Hits 4.3% in September, Market Raises Rate-Hike Odds to 85%
Key Facts
Australia’s consumer price index rose 4.3% in the 12 months to September, compared with 4.0% in August, according to data from the Australian Bureau of Statistics. On a monthly basis, the index increased 0.8% in the unadjusted reading and 0.6% seasonally adjusted. The data came as markets awaited a Reserve Bank of Australia decision, having repriced the chance of a rate hike after the release. A Reuters report published by The Edge Malaysia said the implied probability of a quarter-percentage-point increase reached 85%, compared with 69% before the data. The figures put price pressures and the monetary policy path in focus ahead of the bank’s November meeting.
Quarterly readings show that inflation did not move in a straight line over the year. The annual inflation rate was 3.6% in September 2025, then 3.8% in October, before reaching 4.6% in March 2026. It then fell to 3.5% in July, before rising again to 4.0% in August and 4.3% in September, according to the bureau’s series. On a quarterly basis, the consumer price index rose 1.3% in the September quarter, after a 0.6% increase in the June quarter, while annual inflation on this measure was 3.9%, according to the Reuters report. The different periods provide a broader picture than a single month’s reading: the quarterly measure captures price movements over the quarter, while the annual reading compares price levels over 12 months.
The underlying inflation measure showed that pressures persisted even after excluding the most extreme price movements. The Australian Bureau of Statistics said the annual trimmed mean was 3.6% in the 12 months to September, up from a revised 3.5% in August, while the measure rose 0.3% in September alone. On a quarterly basis, the trimmed mean increased 1.0% in the September quarter, an increase that the Reuters report said matched expectations, leaving the annual rate at 3.6%. This remains above the Reserve Bank of Australia’s 2% to 3% target range. The difference between the 0.3% monthly rise in the trimmed mean and the 1.0% quarterly increase highlights the importance of identifying the period and measure when reading the figures, as they reflect different time spans.
Price pressures were spread across housing and transport, with everyday items directly contributing to higher living costs. Housing was the largest contributor to annual inflation in September, with prices rising 5.2%, while transport prices increased 8.7% year on year, according to the Australian Bureau of Statistics. Within housing, new dwelling prices rose 4.7%, electricity prices 12.8% and rents 3.6% in the 12 months to September. In transport, automotive fuel was the main contributor to the annual increase, with prices rising 23.6% over the same period. The bureau said automotive fuel prices jumped 9.4% in September alone, attributing the increase to higher global oil prices. These components show how housing, energy and fuel costs combined to push the overall index higher.
The increase was not confined to one category of goods and services. Services prices rose 4.1% and goods prices 4.6% in the 12 months to September, while inflation in non-tradable goods and services was 4.5%, according to Australian Bureau of Statistics data. These readings add to the housing and transport indicators and show that increases were broad across different components of the price basket. In explaining the pressures, the Australian Broadcasting Corporation quoted Deputy Governor Andrew Hauser as saying, "These rates are very high, and we have said that repeatedly," adding that private-sector activity was stronger than the bank had expected and that this was "the main driver of this difference." In another report, the broadcaster quoted him as saying the inflation outlook had become "materially worse" than the bank had expected, while the bank targets inflation of between 2% and 3%.
Markets responded to the reading with a rise in the Australian dollar and a decline in government bond futures. The Reuters report said the currency rose 0.3% to 0.7043 U.S. dollars, while three-year government bond futures fell 7 points to 95.08. EL7 data recorded the Australian dollar against the U.S. dollar closing at 0.70535 on October 28. At the same time, market pricing lifted the probability of a quarter-percentage-point rate increase to 85%, from 69% before the data, according to the Reuters report published the same day. The probability estimate varies with the timing of the report: the Australian Broadcasting Corporation cited an estimate of about 85% after the figures were released. Currency and futures moves show how the inflation reading fed into monetary policy expectations and the pricing of domestic assets.
Attention now turns to the Monetary Policy Board meeting on November 2 and 3, according to the Reserve Bank of Australia’s calendar. The bank is scheduled to release its monetary policy decision statement and monetary policy statement on November 3 at 2:30 p.m. Australian Eastern Daylight Time. Before then, the Australian Broadcasting Corporation said the government’s December mid-year budget update is expected to include a savings package. It quoted the treasurer as saying, "We accept our responsibility to fight inflation, and that is why the next budget update in December will include a savings package." The Australian Bureau of Statistics is scheduled to publish the October consumer price index on November 25. Publication dates will also change from February 2027, with data released on the fourth Wednesday of each month instead of the last Wednesday.