Australia’s inflation rate rose more than expected in September, and economists now expect the Reserve Bank to raise interest rates when it meets on Melbourne Cup Day.

The numbers

The Australian Bureau of Statistics said on Wednesday 28 October that the Consumer Price Index rose 0.8% in September and 4.3% over the 12 months, up from 4.0% in August. The trimmed mean, a measure of underlying inflation, was 3.6% over the year, up from a revised 3.5%.

For the September quarter, headline CPI rose 1.3% and the trimmed mean, the RBA’s key underlying measure, rose 1.0%. Westpac said that took the annual trimmed mean to 3.7%.

“Housing was the largest contributor to annual inflation in September, rising by 5.2 per cent,” ABS head of price statistics Rachael McCririck said. New dwelling prices were up 4.7% over the year as builders passed on higher costs, while transport rose 8.7% on the back of fuel, which jumped 9.4% in the month.

Beyond petrol

The worry for the RBA is that price rises are broadening. AMP economists Diana Mousina and My Bui described inflation as coming from “here, there, and everywhere”, noting that services inflation “remains stuck around its current rate of 4.1 per cent”. The ABS also flagged a 15.5% annual rise in games, toys and hobbies, which it attributed to higher prices for memory and storage components as the AI boom lifts demand for chips.

Back in August, the RBA forecast a 0.8% rise in the quarterly trimmed mean. “Today’s 1.0 per cent quarterly gain is confirmation that those inflation risks have indeed materialised,” Betashares chief economist David Bassanese said.

The rate call

After the release, market pricing put the chance of a 0.25 percentage point rise next week at about 85%, according to Bloomberg data cited by the ABC. KPMG chief economist Brendan Rynne called the figures “the last data point necessary for the RBA to increase the cash rate for a fifth time this year”. Westpac said it holds the view that the RBA will raise rates again at the November meeting.

Not everyone thinks it is a done deal. Mr Bassanese said: “The only argument against a rate hike next week is the fact the [RBA] pre-emptively raised rates in September, so may feel it has a little more time to assess economic developments and possibly re-visit the rate hike decision in December.”

RBA deputy governor Andrew Hauser told Senate estimates that inflation was broadly in line with the bank’s expectations but too high. The board meets on Monday 2 November and announces its decision, with new forecasts, on Tuesday afternoon.

What it means for borrowers

For business borrowers, the message is to plan for higher repayments rather than relief. A rise would take the cash rate to 4.85%, the ABC reported, and Mr Rynne warned that “unless we start to see a swing down in inflation over the coming months, then it looks more likely than not another rate rise will be coming at the start of 2027.”

Sources: Australian Bureau of Statistics (28 October 2026); Westpac IQ; ABC News.