Australia's inflation climbs to 4.3%, raising odds of another RBA rate hike

Australia's headline consumer price index increased to 4.3% in September, while the Reserve Bank of Australia's preferred underlying measure rose to 3.6% year-on-year. The data, released by the Australian Bureau of Statistics on Wednesday, arrived ahead of the RBA's monetary-policy meeting scheduled for 3 November, when most analysts anticipate another cash-rate rise.

"The inflation numbers are too high," RBA deputy governor Andrew Hauser told Senate estimates, adding that there is a risk longer-term inflation expectations could rise, making it harder to bring inflation down.

The cash rate currently stands at 4.6%, the highest level in 15 years after four hikes in 2026. RBA officials have signalled that further tightening may be needed to steer inflation back toward the 2.5% target.

Transport costs were up 8.7% over the year, driven largely by higher fuel prices linked to the conflict in the Middle East. Food prices rose 3.2% and housing costs increased 5.2%, with housing being the largest CPI component.

Treasurer Jim Chalmers attributed the rise mainly to high oil prices and a recovering private sector, while acknowledging the government's role in addressing inflation.

"The most important thing that can happen for Australians under pressure is to see an end to this war in the Middle East," Chalmers said.

Economists noted that the economy is already slowing, with subdued household spending, a softened labour market and a weakening housing sector. Stephen Smith of Deloitte Access Economics said the RBA has little appetite to let inflation expectations drift higher after a prolonged period above target.

Market analyst Josh Gilbert described the situation as a "higher-for-longer" inflation story, warning that those hoping for rate relief may need to be patient.

The combination of rising costs and a modest rise in unemployment is intensifying the cost-of-living pressure on Australian households.