Inflation rises to 4.3 per cent ahead of the Reserve Bank's November decision

Prices rose 4.3 per cent in the twelve months to September 2026, up from 4.0 per cent in the year to August, according to the Australian Bureau of Statistics (ABS). The Consumer Price Index (CPI), which tracks the prices households pay for a broad basket of goods and services, was released on 28 October, six days before the Reserve Bank of Australia (RBA) announces its next decision on interest rates.

Headline and underlying inflation both rose in September

Prices rose 0.8 per cent in September alone, or 0.6 per cent after adjusting for seasonal patterns such as school holidays. ABC News reported that this was a faster rise than economists had expected.

The trimmed mean, the main measure of underlying inflation, rose to 3.6 per cent over the year. It lines up the price changes across the CPI basket, sets aside the largest rises and falls, and averages the middle of the range, so it shows how broad price rises are. The ABS revised the August figure from 3.6 to 3.5 per cent after a change in its seasonal adjustment. A second underlying measure, the weighted median, was 3.4 per cent.

Our article of 9 October covered the August figures, when the trimmed mean held at 3.6 per cent for a third month. September shows it moving up again.

The quarterly measure ran ahead of the Reserve Bank's forecast

Because September ends a quarter, the release also carried figures for the three months to September. Westpac's economists reported that prices rose 1.3 per cent in the quarter, with the annual rate on the quarterly measure steady at 3.9 per cent. The quarterly trimmed mean rose 1.0 per cent, lifting its annual rate from 3.6 to 3.7 per cent.

The RBA's August forecasts assumed a rise of 0.8 per cent in the September quarter, investingLive reported on 26 October, while the four major banks' economists had expected 0.9 to 1.0 per cent. On 21 October the RBA's Deputy Governor had said this figure was likely to come in above the Bank's August assumption.

Fuel, electricity and holidays led the rise

The ABS named the main sources of the increase in its release:

• Fuel. Automotive fuel prices rose 9.4 per cent in September and were 23.6 per cent higher than a year earlier, driven by higher world oil prices. Transport costs were up 8.7 per cent over the year.
• Housing. Housing was again the largest contributor, up 5.2 per cent, easing from 5.7 per cent in August. Electricity rose 12.8 per cent, which the ABS put mainly down to the end of Commonwealth power bill rebates. Rents rose 3.6 per cent, unchanged since May.
• Travel and services. Recreation and culture prices rose 3.8 per cent in the month, as school holidays and major sporting events lifted holiday travel. Prices of services rose 4.1 per cent over the year and goods 4.6 per cent.

Food prices rose 3.2 per cent over the year, and insurance 5.4 per cent. Clothing and footwear rose just 0.4 per cent, partly because gold prices fell. The ABS also noted that some project home builders increased discounts as demand slowed. The Treasurer said on 28 October that the result was too high, and pointed to the conflict in the Middle East and strong private investment, including in data centres, as drivers, ABC News reported.

Market pricing for a November rate rise moved to about 90 per cent

The RBA raised the cash rate four times this year, most recently to 4.60 per cent from 30 September. Its Board announces its next decision at 2.30 pm on Tuesday 3 November, together with new forecasts. Inflation remains above its target of 2 to 3 per cent.

Before the release, market pricing put the chance of a rise in November at more than 60 per cent. By late afternoon on 28 October, pricing in overnight index swaps implied a chance of about 90 per cent, according to ABC News. Westpac's economists said after the release that they expect the RBA to raise the cash rate again at the November meeting. These are market and bank views, and the Board makes its own decision.

Markets moved only a little. The ten year Australian Government bond yield rose from 5.19 to 5.22 per cent through the afternoon, and the S&P/ASX 200 index closed about where it started the day, near 8,847 points, ABC News reported. The October CPI is due on 25 November.

Savers can compare their interest rate with inflation

When inflation rises, the real return on savings, the interest rate earned minus inflation, falls. Variable rates on cash accounts can move when the cash rate does, while a term deposit fixes its rate for the term, so the rate is known in advance even as the outlook shifts. Treasury Indexed Bonds, Australian Government bonds whose capital value is adjusted with the CPI, are one way some investors link part of their money to inflation. Like other bonds, their price can move before maturity.

We arrange high interest cash accounts, term deposits, government and corporate bonds and managed funds, and give access to shares and exchange traded funds. Your adviser can look at how these could fit with when you need your money and the income you would like from it. The full release is on the ABS website.

If you would like to talk about what higher inflation and the coming rate decision could mean for your savings, investments or borrowing, please get in touch with your adviser.

This article is general information only. It does not take into account your objectives, financial situation or needs, and it is not a recommendation to buy, sell or hold any investment. Figures are as published on the dates given. Past performance is not a reliable indicator of future performance. Read the full risk warning