Australia’s battle against rising prices has suffered a significant setback, with new data showing inflation surged in September at a pace that exceeded market expectations. The figures, released today by the Australian Bureau of Statistics (ABS), have all but confirmed that the Reserve Bank of Australia (RBA) is facing intense pressure to deliver another interest rate hike when its board meets next week.
According to the ABS, the monthly Consumer Price Index (CPI) rose to 0.8 per cent in September, doubling the 0.4 per cent increase recorded in August. This jump pushed the annual inflation rate to 4.3 per cent, up from 4 per cent the previous month. The data also showed an increase in the annual trimmed mean—the RBA’s preferred measure of underlying inflation—which climbed to 3.6 per cent, slightly higher than the downwardly revised 3.5 per cent seen in August.
Rachael McCririck, head of price statistics at the ABS, identified the housing sector as the primary engine driving the cost-of-living crisis. “Housing was the largest contributor to annual inflation in September, rising by 5.2 per cent,” McCririck noted. The persistent strength in housing costs, combined with broader inflationary pressures, suggests that price growth is proving more stubborn than the central bank had previously anticipated.
The timing of this release is critical for the RBA, which is set to convene on Monday for its final policy meetings of the year. The board is expected to hand down its interest rate decision on Tuesday afternoon, alongside the release of its updated economic forecasts.
Market sentiment had already shifted toward a hawkish outlook prior to today’s report. Last week, RBA Deputy Governor Andrew Hauser issued a stern warning that the inflation outlook appeared “materially worse” than the central bank’s prior projections. That commentary, coupled with the latest data, has sent expectations for a November rate hike soaring. Before today’s announcement, market pricing already indicated a greater than 60 per cent probability of an increase; that likelihood is expected to climb further as analysts digest the new figures.
For Australian households, the news comes as a stinging blow. With the RBA already having lifted rates aggressively over the past 18 months, another increase would place further strain on mortgage holders and consumers already grappling with high rents and elevated grocery costs.
As the board prepares to meet, economists are looking closely at whether the RBA will opt for a pause to monitor the impact of previous hikes or move decisively to curb the re-acceleration of inflation. With the central bank’s inflation target of 2 to 3 per cent still appearing distant, Tuesday’s decision is now viewed as one of the most pivotal in recent months. All eyes remain on the RBA to see if they will prioritize slowing the economy to bring prices back into line.
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