Australian inflation hits 4.3% in September, raising odds of RBA rate hike

Australia’s consumer price index for the 12 months to September increased to 4.3%, up from 4.0% in August, according to the Australian Bureau of Statistics. The trimmed-mean measure, which excludes the most volatile items, was 3.6%.

Both readings remain above the Reserve Bank of Australia’s 2-3% inflation target, intensifying pressure on the central bank ahead of its November policy meeting.

“What we have evidence on is inflation and the evidence there is it is far too high,” RBA Governor Michele Bullock told a Senate estimates hearing.

Market expectations for a rate rise on the Melbourne Cup-day meeting climbed to 79% from 66% after the data release. Several analysts now forecast a 25-basis-point hike to 4.85%.

“We now expect the RBA to hike the cash rate by 25 basis points to 4.85 per cent,” Commonwealth Bank head of Australian economics Belinda Allen said.

“This is an ugly number for the RBA and significantly strengthens the case for another rate hike next week,” Global X ETF senior investment strategist Marc Jocum added.

Economists highlighted housing and transport as the main contributors to the rise. ABS head of price statistics Rachael McCririck noted housing inflation of 5.2% and transport inflation of 8.7%, driven largely by higher fuel prices.

“Annual inflation of 5.2 per cent for housing reflected rising costs for both new dwellings and electricity,” McCririck said.

Political figures also weighed in. Treasury Minister Jim Chalmers linked the increase to higher oil prices from the US-Iran conflict, while opposition leaders blamed government spending.

“From an economic point of view, the conflict can’t end soon enough. The numbers in today’s data are still too high,” Chalmers said.

RBA Deputy Governor Andrew Hauser told the Senate committee that the figures were broadly in line with the bank’s forecasts but remained “too high.”

“We are watching that issue really closely but it is a particular risk,” Hauser said.

Analysts warned that persistent inflation could force the RBA to continue raising rates, though a weaker labour market and slower growth could make further hikes harder for households and businesses.

“The important signal in today’s figures is that underlying inflation remains too high, making it increasingly difficult for the RBA to treat external inflation pressures as something it can simply look through,” BDO chief economist Anders Magnusson said.

The upcoming decision will determine whether the cash rate reaches its highest level since the 2008 global financial crisis.