Annual inflation surges to 3.2pc in September quarter, up from 2.1pc in June
Inflation has surged in the September quarter with consumer prices rising at an annual pace of 3.2 per cent, up from 2.1 per cent in the June quarter.
That level of inflation came in much hotter than economists were expecting, squashing hopes of a rate cut next week.
“With inflation vastly overshooting the RBA’s forecasts the bank won’t cut interest rates at its November meeting, and the chances that it won’t loosen policy any further are rising,” said Marcel Thieliant, head of Asia Pacific at Capital Economics.
Headline inflation rose by 1.3 per cent in the quarter, which was the highest quarterly rise since March 2023.
Michelle Marquardt, ABS head of prices statistics, said the largest contributor to the quarterly movement in prices was electricity costs, which rose by 9 per cent.
Annual electricity price reviews came into effect from July 2025 and increased electricity across all capital cities.
The “trimmed mean” measure of inflation, which is the Reserve Bank’s preferred measure of underlying inflation, also rose in September, from 2.7 per cent to 3 per cent.
The RBA had forecast that headline inflation would rise quite sharply at this point in the cycle, with various government electricity rebates wearing off.
But it was not forecasting underlying inflation to rise from 2.7 to 3 per cent. It was forecasting underlying inflation to be 2.6 per cent by the end of December.
Ben Udy, lead economist for Oxford Economics Australia, said the sharp rise in inflation had delivered “the knockout blow” to any remaining hope of a November rate cut.
However, he said he did not think it was anything to panic about.
He said inflationary pressures would still subside over the next 12 months and the RBA would likely still cut rates next year.
“The strength in today’s inflation data is largely temporary,”
Mr Udy said.
“As the impact of the unwind in electricity rebates fades, wage growth continues to cool, and global trade disruption increases the flow of cheaper imports into Australia, we expect inflation to ease meaningfully over the year ahead.
“At the same time we expect the deterioration in the labour market to persist, forcing the bank to cut rates toward neutral.
“We’ve pencilled in two rate cuts in the first half of 2026.”
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