Australia's headline inflation rate jumped to 3.2 per cent in the year to September, up from 2.1 per cent in June, as waning government subsidies drove a spike in household electricity bills. The rise squashed any lingering chance of a rate cut by the Reserve Bank of Australia next week or later this year.
The Australian Bureau of Statistics figures also confirmed the first rise in underlying inflation in nearly three years. The Reserve Bank's preferred trimmed mean measure climbed by 1 per cent in the three months to September, far exceeding the RBA's forecast of 0.6 per cent, leaving annual underlying inflation at 3 per cent.
Economists said the data ruled out a fourth rate cut on Tuesday and pushed any mortgage relief deeper into 2026. Jonathan Kearns, chief economist at Challenger, said 'the path for inflation returning to the RBA's target of 2.5 per cent was never going to be smooth, but this is a big bump'. Brendan Rynne of KPMG said the resurgent inflation 'provides the justification for the RBA to sit on its hands'.
The ABS said the main contributor to the headline annual inflation rate was a 24 per cent rise in electricity prices, primarily affecting households in Queensland, Western Australia and Tasmania. Grocery items were 3.1 per cent higher, including a 15 per cent rise in coffee, tea and cocoa prices due to issues with overseas coffee bean suppliers.
RBA Governor Michele Bullock this week said a quarterly rise in underlying inflation of 0.9 per cent would be a 'material miss', signalling the board would not cut rates next week. The probability of a rate cut in 2025 now appears slim, though a bad monthly jobs report could complicate the December decision.
