Inflation is not under control: Will the RBA hike rates again?
Key takeaways
- Annual inflation has just risen to 4% for the last 12 months.
- The bad news comes just one day after the Reserve Bank increased the cash rate for a fourth time in 2026 in order to bring inflation down.
- What's next: Rising home construction costs and fuel prices were behind the surging inflation figures.
In another blow to borrowers, today's inflation figures have come in too hot. That's despite four increases to the cash rate this year.
Annual inflation rose to 4% over the last 12 months to August 2026 according to the latest consumer price index figures from the Australian Bureau of Statistics.
Last month, inflation was 3.5%. Today's figure is a significant increase in just a month.
Underlying inflation, which smoothes out some of the volatility of the main headline rate, stayed at 3.6% for the third month straight.
This means inflation is clearly persistent throughout the economy and is not going away.
What's driving inflation?
The main driver of inflation was higher housing costs, driven by rising costs for materials and labour.
House prices are falling, but the price of established homes is not measured by the inflation rate.
Rising fuel costs, thanks to the ongoing US-Iran war, were the second-biggest driver of annual inflation.
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Are the RBA's rate hikes working?
The Reserve Bank raised the cash rate for a fourth time this year yesterday. Interest rates are now at highs not seen in 15 years.
And while it will take at least a month or two before yesterday's rate hike flows through and affects the rest of the economy, it's clear that inflation is not under control yet.
The Reserve Bank governor Michelle Bullock has already warned that inflation remains too high, and the bank has certainly not ruled out further rate hikes this year or next year.
"Inflation remains elevated and some of the upside risks flagged in August are materialising," the RBA board said in a statement yesterday.
"The conflict in the Middle East has broadened and global energy prices are now much higher than had been assumed in the August forecasts."
Currently, 47% of the experts Finder surveys each month expect the Reserve Bank will hike the cash rate again before the end of the year. Today's data only makes that more likely.
Sources
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