Strong inflation sets course for RBA to hike next week
The Australian Bureau of Statistics (ABS) has released Consumer Price Index (CPI) data for September 2026.
The key movements are illustrated below:
Headline CPI rose by 4.3% in the 12 months to September 2026, up from 4.0% in the 12 months to August.
Housing was the largest contributor to annual inflation in September, rising by 5.2%.
Transport was the second-largest contributor to annual inflation in September, rising 8.7% due to higher automotive fuel prices.
The policy-relevant trimmed mean annual inflation was 3.6% in September, up from 3.5% (revised) in August.
Using the pre-October 2025 methodology, quarterly trimmed mean CPI inflation was 1.0%, while annual trimmed mean inflation was 3.7% and continues to rise:
The annual result of 3.7% for the quarter was slightly above the 3.6% expected by economists and financial markets.
In her opening statement today to the Senate Economics Legislation Committee, Reserve Bank of Australia (RBA) governor Michele Bullock took a hawkish tone on inflation and interest rates, tying the deterioration in the inflation outlook directly to re-escalating Middle East conflict and higher energy prices.
Bullock also said that inflation is likely to be higher than the RBA’s August base case, as some of the upside risks it flagged have materialised. She stressed that inflation is not only being imported, with elevated underlying inflation tied to domestic demand.
Bullock also said the labour market looks a little tighter than previously judged, even though unemployment has risen more than expected.
Weak productivity growth also means a longer period of subdued demand growth is needed to bring inflation down sustainably.
Looking ahead, Bullock said the RBA Board will assess the data and the balance of risks next week, with a key question being whether the tightening to date will be enough to return inflation to target in a reasonable time.
Given the firming of trimmed mean inflation shown above, the balance of probabilities suggests the RBA will hike again on Tuesday.
