Australian inflation rose more than expected in October, the debut release of full monthly CPI data from the ABS following its overhaul from quarterly prints. Market pricing for another RBA cut this easing cycle fell to around 33% after headline inflation rose 3.8%yr (vs 3.6% expected, prior 3.6%) and core or trimmed mean firmed to 3.3%yr (vs 2.9%, prior 3.2%).
Source: ABS
Monthly headline inflation was flat in October (0%), down from 0.5% in September, but the annual rate rose from 3.6% to 3.8% - its fastest since Q2 2024 - on base effects. Annual inflation is up from recent low of 1.9%yr in June due largely to the impact of last year's energy bill rebates fading out. However, core inflation has also lifted - but more moderately - from a low of 2.8%yr in June to 3.3% currently (fastest since Q4 2024), indicating price pressures have firmed broadly across the basket. That has seen the RBA turn more cautious on further rate cuts, despite reduced labour market tightness.
The RBA will take its time to get used to the new monthly CPI data, which is noisier than the quarterly data that has always guided policy. For example, electricity prices actually fell 10.2% in October as households in NSW and the ACT received rebates from the extension of the federal government scheme. But because electricity prices fell by more in October 2024 (-12.3%), the annual rate lifted from 33.9% to 37.1% - a key factor that pushed up annual headline CPI.
Source: ABS
Electricity prices also contributed towards lifting goods inflation from 3.7% to 3.8% at an annual rate. Services inflation ticked up to be running at 3.9%yr from 3.5%yr in September, with the key drivers including rents (4.2%), medical services (5.1%yr), and holiday travel (7.1%).
