Australia's inflation problem isn't going away anytime soon.
On Wednesday, the Australian Bureau of Statistics (ABS) released the latest consumer price index (CPI), revealing that both headline CPI and trimmed mean inflation are still above the Reserve Bank of Australia's (RBA) target inflationary range, and in some cases rising.
In the 12 months leading up to August, headline CPI rose to 4.0%, up from 3.5% in the year to July. Trimmed mean inflation — which many economists consider a better indicator of inflationary pressures because it strips out goods with volatile price changes — remained unchanged at 3.6%, the same as in June and July.
The biggest contributor was housing, up 5.7% in the year leading up to August, compared with an increase of 5% in the 12 months to July, on a seasonally-adjusted basis. Other contributors include transport, alcohol and tobacco, and education, up 5.6%, 4.9% and 4.7%, respectively. Costs of insurance and financial services rose 3.5% during the year.
But housing prices weren't equal by city. In Adelaide, costs of housing rose 7.9% in the year leading up to August, the highest nationally. Darwin came in at a close second at 7.6%, followed by Hobart at 7.2% and Brisbane at 6.2%. Canberra, Perth and Sydney sat in the middle, with the cost of housing rising 5.4%, 5.5% and 5.9%, respectively. Melbourne had the lowest level of housing cost increases, up 4.5% for the year.
New dwellings prices were up 5.4% in the year, compared with an increase of 5.7% in July, thanks to project builders raising their base rates as a result of higher labour and supply costs. Electricity, meanwhile, rose 13.2%. That's on top of a 6.1% rise in July and primarily a result of the end of the Commonwealth electricity rebates. Insurance costs rose 5.6% in the year. Rental prices were up 3.6% in August, unchanged since May of this year.
"This reflects relatively stable rental inflation while new dwelling inflation eased to 0.2%, month-over-month, a sign that builders are finding it difficult to pass on costs given the soft housing market," Jack Chambers, senior rates strategist at ANZ, wrote in a note. "This dynamic is likely to continue."
By capital cities, Hobart residents have been hit with the highest inflationary pressures, up 4.8% in the year, followed by Adelaide at 4.7%. Darwin, Perth, Canberra and Brisbane also had levels up 4%, at 4.5%, 4.3%, 4.1% and 4.1%, respectively. Conversely, Sydney and Melbourne had the lowest levels of inflation at 3.9% and 3.5%, respectively.
On a monthly basis, automotive fuel prices were up 14.8% in August, compared with a 7.5% increase in July.
"This was driven by higher world oil prices and the unwinding of the remainder of the federal government's fuel excise relief measures in August,” said Rachael McCririck, head of price statistics at ABS.
The latest inflation data comes just one day after the nation's central bank raised interest rates for the fourth time in 2026, bringing the official cash rate (OCR) to 4.60%, its highest levels since 2011.
While widely expected, the news was met with dismay by mortgage holders and business owners nationwide, many of whom are navigating a number of headwinds, including rising living and supply costs.
The RBA has been adamant that it will not lower interest rates until inflation is back within the target band of 2% to 3%. At Tuesday afternoon's press conference, RBA Governor Michele Bullock added that the bank would raise rates again this year, "if that's what's needed to get inflation down."
"Our estimates suggest that it can take 12, sometimes, perhaps even 18 months in some sense, for the full effect of interest rates to come through," Bullock told reporters.
"We've got to see how these four interest rate rises feed through," the governor continued. "What we're observing at the moment, what we'll observe [on Wednesday], is, what's the point of the four interest rate rises? A number that happened a month ago. We're trying to look forward and we're trying to say, how are the interest rate increases we've done so far? What are they going to deliver for the economy in a few months' time and into early next year? That is the critical thing. Not the number, but what that number will confirm for us tomorrow — probably if it comes in on expectations — is that inflation in the first half of this year was unacceptably high.
"People are feeling, quite rightly, very annoyed and very upset about the fact that the costs of everything are rising; that their wages are not keeping pace with that. They're seeing wage, real wage cuts, and then on top of that, they've got this shock from the Middle East, which has nothing to do with them, but it's made us all poorer," Bullock added. "This is true. So I understand all those sentiments. The best thing we can do is get that inflation rate back down to 2.5%, where it sits in the background, people are not worrying about it. And when we can get to that point, then — and hopefully if we get some productivity growth — then we'll be able to grow and we will be able to get some real wage rises."
Persistently high inflation is doing little to ease market fears. While Bullock made clear the RBA would raise rates again to bring inflation under control, markets are now questioning whether the next hike could come sooner rather than later, potentially as early as this year.
"It's more likely than not that there'll be a rate rise in November," Saul Eslake, a Hobart-based economist, told Australian Broker. "But it's not an open-and-shut deal."
Others have placed their bets on the December meeting.
"A December rate hike in our view is becoming increasingly more likely to occur given today’s CPI results,” said Russel Chesler, head of investment and capital markets at global investment management firm VanEck. “We do not believe the RBA’s one increase yesterday will be sufficient to bring inflation under control."
"This month's CPI doesn’t take into account the September spike in oil prices, where Brent crude reached levels of $109 a barrel USD, the highest since May when the Australian government was subsidising fuel excise duty," Chesler added.
Chambers from ANZ agreed.
"We still think another rate hike at the November meeting, taking the cash rate to 4.85%, is more likely than not," he said. "The Governor did say in the press conference following the September meeting that the Q3 data would only tell them about the past, and that any further tightening would be about the future. However, the sort of upside surprise on inflation we expect, combined with higher energy prices, would likely necessitate an upward revision to the RBA’s inflation forecasts, which would need to be offset by another hike."
But not everyone is convinced rate hikes are coming in November.
"Yesterday’s press conference suggests the hurdle for another rate increase is now higher. Governor Bullock emphasised the need to assess the broader flow of data and appeared to push back against the idea that a single strong inflation outcome would necessarily be sufficient to prompt another increase," said Trent Saunders, senior economist at Commonwealth Bank of Australia (CBA). "For now, we continue to expect the RBA to leave the cash rate unchanged in November.
"However, the decision remains finely balanced and will depend on the context of the meeting, including the outcomes for the Q3 2026 CPI, labour market conditions, household spending and developments in the conflict in Iran," he added.
