Inflation still rising: making another RBA rate hike likely
Key takeaways
- Inflation rose 4.3% over the last twelve months, with trimmed mean or underlying inflation rising 3.6%.
- The main drivers of inflation were housing construction costs and fuel prices.
- What's next: This is higher than expected, and makes a rate hike next week even more likely.
Inflation is still too high, which means the Reserve Bank of Australia may have no choice but to raise the official cash rate again when it meets next week.
Annual inflation was 4.3%, according to the latest monthly Consumer Price Index figures released today by the ABS. That's much higher than the RBA's target of 2–3% and increase on last month's figures.
And it's higher than it was last month, meaning the rate of inflation is increasing, not slowing.
Underlying inflation, a measure that removes short-term, volatile price spikes to arrive at a deeper understanding of sustained inflation in the economy, also rose slightly, up 3.6% in the last 12 months versus 3.5% in the previous month's figures.
The main drivers of inflation, according to the ABS, are housing construction costs and fuel prices.
Another rate hike likely
Today's inflation figures are terrible news for borrowers, businesses and the Reserve Bank. Despite four rate hikes this year, prices are still too high and the economy is running too hot.
Last month the RBA took interest rates to levels not seen in 15 years. And days later the September inflation figures came in higher than expected, driven by housing construction costs and higher fuel prices.
And it's clear from today's figures that these rate hikes aren't working, or aren't working fast enough. The RBA has already signalled that rates may need to go higher.
Currently at 4.60%, another 25-basis-point hike would bring the cash rate to 4.85%. That's a level Australians haven't seen since 2011, when the cash rate spent most of the year at 4.75%, or the Global Financial Crisis, when the cash rate plunged from 7.25% to 3.0% in the space of a year.
Bad news for borrowers who are already stretched
The RBA has increased the cash rate four times in 2026, by a total of 100 basis points (or a single percentage point).
This has added hundreds of dollars a month to the average borrower's mortgage repayments. According to Finder's Consumer Sentiment Tracker, 35% of Australian borrowers are already struggling to make mortgage repayments.
Today's numbers are the last thing they need.
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