Australian inflation continued to increase in September, with markets now pricing in around a 90% chance of a 25bps RBA rate hike next week, up from 67% yesterday. The RBA has already increased the cash rate from 3.6% to 4.6% this year after inflation turned for the worse moving further above the 2-3% target band. Today's report showed headline inflation increased by 3.9% over the year to the September quarter (unchanged from the June quarter), while the monthly data series clocked the increase at 4.3%, up from 4% previously. The RBA's preferred trimmed mean measure, which excludes the most volatile price changes, lifted from 3.6% to 3.7% in the quarterly data and rose from 3.5% to 3.6% in the monthly series, outpacing the central bank's earlier forecasts.
Headline inflation (tracking all price changes across the CPI basket) increased by 0.8% in September and 1.3% in the quarter. Those outcomes were a little stronger than expected. Fuel prices were a major factor, up a further 9.4% in September to be 35% higher over the past 3 months. That reflects the unwinding of the federal excise tax cut as well as renewed tensions in the Gulf pushing global oil prices up again.
Domestically, holiday travel costs picked up sharply (8%m/m) in September, responding to strong demand during the school holiday period that also coincided with the AFL and NRL finals series. International travel also saw a strong rise (7.2%m/m).
Over the past year, housing-related costs have been the major driver of inflation rising by 5.2%; however, that pace has slowed materially since the start of 2026. The significant slowdown in the established housing market may be starting to weigh on housing construction costs, which have eased to a 4.7%yr pace from almost 6% a few months ago. Meanwhile, electricity prices have risen 12.8%yr but were increasing much more rapidly earlier this year after government rebates had ended.
