Australia's headline inflation rate surged to 3.2% in the year to September, up from 2.1% in June, driven by a 24% rise in electricity prices as government subsidies expired. The Australian Bureau of Statistics reported that the main contributor was higher out-of-pocket costs for households in Queensland, Western Australia, and Tasmania.
The Reserve Bank of Australia's preferred trimmed mean measure of underlying inflation rose 1% in the September quarter, far exceeding the RBA's forecast of 0.6%, marking the first acceleration in nearly three years. Annual trimmed mean inflation reached 3%, up from 2.7% in June.
Economists have ruled out any chance of a rate cut at the RBA's November meeting, with further mortgage relief likely pushed back into 2026. Jonathan Kearns, chief economist at Challenger, described the inflation spike as "a big bump" on the path to the RBA's 2.5% target.
KPMG chief economist Brendan Rynne said the resurgent inflation "provides the justification for the RBA to sit on its hands," but noted that rate cuts are still "absolutely needed" to support the economy. Grocery prices rose 3.1% annually, with coffee, tea, and cocoa up 15% due to supply issues.
RBA Governor Michele Bullock had indicated that a quarterly rise in underlying inflation of 0.9% would be a "material miss," effectively ruling out a rate cut next week. The central bank remains more concerned about inflation than a recent uptick in unemployment, which Bullock described as "still pretty low."
