On a Wednesday morning, while two of the central bank's senior officials sat before a Senate hearing, Australia's annual inflation climbed to 4.3 per cent, a reading that suggests the price pressures many had hoped were receding are instead spreading across the economy. Like a tide that returns with more force than expected, the rise is driven by housing, fuel, health, and even the imported cost of computer components fed by a global appetite for artificial intelligence. The Reserve Bank, which has already tightened policy this year, now faces a choice that will shape household budgets into th
Australian Inflation Climbs to 4.3% in September, Pushing Rate Hike Odds Toward Near-Certainty
Inflation 'from here, there, and everywhere'
Mark
The headline is 4.3 per cent. Why did this particular number shift expectations so much?
Mimi
Because it came in above what markets expected, and the monthly reading doubled from 0.4 to 0.8 per cent. Then the trimmed mean rose too, and that one strips out fuel.
Mark
So it isn't just petrol prices.
Mimi
Right. Fuel rose 9.4 per cent, but underlying inflation still went to 3.6 per cent, and the quarterly trimmed mean of 1 per cent beat the RBA's own 0.8 per cent forecast.
Luke
Worth being careful on the 85 per cent figure. That's market pricing from Bloomberg data, not a statement from the RBA. The bank hasn't decided anything yet.
Mark
Fair. What did the RBA itself say?
Mimi
Andrew Hauser said inflation was broadly in line with expectations but too high. A week earlier he'd said the outlook looked materially worse than forecast.
Luke
Those two statements sit a bit awkwardly together, and the reporting doesn't explain how. It's also KPMG's Brendan Rynne calling this the last data point needed. That's his view, not the board's.
Mark
And not everyone expects a run of hikes?
Mimi
Bassanese expects a hike next week and then a pause in December, partly because the RBA already moved pre-emptively in September.
Luke
And Rynne's talk of a rise in early 2027 is conditional on inflation not falling. Nobody here actually knows that path yet. The forecasts released Tuesday will tell us more.
Der Puls
- Annual inflation jumped to 4.3 per cent and the monthly reading doubled, unsettling a economy that had seemed to be cooling.
- The underlying trimmed mean measure rose to 3.6 per cent, pushing well above the central bank's 2 to 3 per cent target and signalling that the pressure is not just fuel.
- Price rises are coming from everywhere at once, with services stuck near 4.1 per cent and computer games and hardware climbing as chip costs pass through.
- Markets have priced in roughly an 85 per cent chance of a rate hike at next week's meeting, and economists warn that credibility is at stake.
- Some forecasters expect a single hike followed by a pause in December, a possible reprieve for households if the bank holds its nerve.
On a Wednesday morning, while two of the central bank's senior officials sat before a Senate hearing, Australia's annual inflation climbed to 4.3 per cent, a reading that suggests the price pressures many had hoped were receding are instead spreading across the economy. Like a tide that returns with more force than expected, the rise is driven by housing, fuel, health, and even the imported cost of computer components fed by a global appetite for artificial intelligence. The Reserve Bank, which has already tightened policy this year, now faces a choice that will shape household budgets into the new year, and the question is whether patience or further tightening will prove the wiser course.
The inflation figure reached the Reserve Bank's officials while they were at a Senate estimates hearing on Wednesday morning. Annual inflation had risen to 4.3 per cent in September, up from 4 per cent, and the monthly reading had doubled. Housing was the largest contributor, and fuel prices, up 9.4 per cent over the year, pushed transport costs higher.
What troubled economists most was the underlying trend. The trimmed mean, which strips out volatile items like fuel, rose to 3.6 per cent, well above the bank's target of 2 to 3 per cent. Services inflation remains stubbornly near 4.1 per cent, and roughly 45 per cent of consumer price categories are running above 3 per cent. The pressure is, as one economist put it, coming from here, there and everywhere.
Markets responded quickly, and the chance of a rate rise at next week's meeting jumped to about 85 per cent. Deputy governor Andrew Hauser said inflation was broadly in line with expectations but still too high, and he had warned only a week earlier that the outlook was materially worse than forecast.
Not everyone expects a relentless climb. One forecaster sees a hike next week followed by a hold in December, arguing the bank may want time to see how its earlier move plays out. Others warn that failing to act could damage the bank's credibility and entrench higher expectations. The board's decision, due Tuesday with updated forecasts, will show which path it takes.
The number landed on Wednesday morning while two of the Reserve Bank's most senior officials were seated at a Senate estimates hearing: Australia's annual inflation rate had climbed to 4.3 per cent in September, up from 4 per cent in August. The monthly reading doubled, from 0.4 per cent in August to 0.8 per cent, according to the Australian Bureau of Statistics.
Housing was the biggest contributor to the annual figure, rising 5.2 per cent, said Rachael McCririck, the ABS head of price statistics. Transport pushed the number up as well, largely because fuel prices rose 9.4 per cent over the year to September.
The measure the central bank watches most closely for underlying pressure also moved the wrong way. The annual trimmed mean rose to 3.6 per cent, with August revised down slightly to 3.5 per cent. That matters because the trimmed mean strips out volatile items, and fuel is among them, so the rise cannot be blamed on petrol alone. On a quarterly basis, the trimmed mean rose 1 per cent in the September quarter. Betshares chief economist David Bassanese noted that the RBA's August forecast had been 0.8 per cent, calling the result confirmation that the inflation risks had materialised. He pointed to the pass-through of higher oil prices into a wider range of goods and services, along with stubborn local service-sector inflation.
Markets reacted quickly. According to Bloomberg data, the odds of a 0.25 percentage point rate rise at next week's meeting jumped to about 85 per cent. KPMG Australia chief economist Brendan Rynne called the figures the last data point the RBA needed to lift the cash rate for a fifth time this year. Pricing pressures, he said, are growing rather than weakening, and the upswing is catching the market off guard. He added that unless inflation begins to fall in the coming months, another rise at the start of 2027 looks more likely than not.
At the Senate hearing, deputy governor Andrew Hauser said inflation was broadly in line with the bank's expectations but remained too high, something he said the bank had said repeatedly and would say again. The RBA targets inflation of 2 to 3 per cent. Just a week earlier Hauser had warned that the inflation outlook looked materially worse than the bank had forecast, raising the prospect of a hike next week.
Not every forecaster sees a straight line upward. Bassanese's base case is a hike next week followed by a hold in December, a pre-Christmas reprieve for households. He said the only argument against moving next week is that the RBA already raised rates pre-emptively in September, and so may feel it has more time to assess the economy and revisit the decision in December.
The breadth of the pressure worries economists. AMP's Diana Mousina and My Bui described the inflation as coming from here, there and everywhere. Goods inflation has picked up since the second half of 2025, while services inflation has barely eased since COVID and remains stuck around 4.1 per cent year on year. About 45 per cent of CPI categories rose more than 3 per cent annually, little changed since the start of the year.
The detail shows how varied the sources are. Health prices rose 3.7 per cent, led by medical and hospital services, up 4.8 per cent. Recreation rose 4.5 per cent, with domestic holiday travel and accommodation up 5.3 per cent and games, toys and hobbies up 15.5 per cent. The ABS attributed the games increase to higher memory and storage component prices being passed on to consumers, as the AI boom lifts demand for chips. AMP noted that other countries are also seeing IT prices rise after years of declines, a concern for Australia because it imports most of these products. The economists also warned that if the RBA does not raise rates, its credibility could take a hit and embed higher inflation expectations further.
The RBA board begins its meeting on Monday and will announce its decision on Tuesday afternoon, alongside updated economic forecasts, including for inflation.
Bemerkenswerte Zitate
Inflation was broadly in line with expectations but too high; the RBA has said so repeatedly and will again.— Andrew Hauser, RBA deputy governor
The data is the last data point necessary for the RBA to raise the cash rate for a fifth time this year.— Brendan Rynne, KPMG Australia chief economist
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