Inflation has hit a six-month high of 4.3 per cent despite four interest rate hikes this year, adding to pressure on the Reserve Bank to raise interest rates again at next week’s Melbourne Cup Day meeting.
Annual inflation rose from 4 per cent in August to 4.3 per cent in September, the highest rate since March, when inflation stood at 4.6 per cent.
‘This is an ugly number for the RBA and significantly strengthens the case for another rate hike next week,’ senior investment strategist at ETF provider Global X Marc Jocum said.
Market pricing for a November rate hike climbed from about 60 per cent ahead of the data release to about 80 per cent afterwards, Mr Jocum said.
If the RBA raises rates next week, the cash rate would rise from 4.60 per cent to 4.85 per cent.
For borrowers with a $600,000 mortgage, another hike would add about $92 to monthly repayments, on top of roughly $364 from this year’s four earlier increases.
Once all five rises flow through, monthly repayments would be about $456 higher, equivalent to an extra $5,472 a year.
Treasurer Jim Chalmers pointed to the war in the Middle East and higher oil prices as factors worsening Australia’s inflation problem.
Treasurer Jim Chalmers pointed to the war in the Middle East and higher oil prices as factors worsening Australia’s inflation problem.
Market pricing for a November rate hike climbed from about 60 per cent ahead of the data release to about 80 per cent following
‘We already had an inflation challenge in our economy and the war in the Middle East is making it worse.
‘We’ve seen higher oil prices driving higher inflation around the world, and today’s figures confirm that we are not immune from that. And that’s why, once again, from an economic point of view, the end of the war in the Middle East can’t come soon enough.’
Daily Mail Political and Economics Editor Peter van Onselen said the government needed to spend less to help slow price rises.
‘Jim Chalmers can point to international factors driving inflation, but that only makes restraint at home more urgent. He can’t control global prices, but he can control how much his government spends, and we are spending beyond our means,’ he said.
‘If the Treasurer won’t take some heat out of the economy via spending cuts, the RBA needs to do it with higher interest rates. That means anyone with a mortgage, and businesses carrying debt, paying the price for his refusal to make hard budget decisions.
‘A targeted austerity drive would let the government choose where to tighten its belt. Higher rates are a blunt instrument that hurt households, discourage investment and put jobs at risk. Chalmers needs to explain why spending restraint is too hard but another hit to family budgets is somehow okay.’
The renewed inflation pressure also casts doubt on the Albanese government’s earlier assessment that the worst of the challenge was behind Australia.
In January 2025, Chalmers declared the country had turned a corner after headline inflation fell to a near four-year low of 2.4 per cent in the December quarter.
Shadow Treasurer Tim Wilson said government spending had been been the key driver of the elevated core inflation or underlying inflation
‘The worst of the inflation challenge is now well and truly behind us, and that’s one of the reasons why we are confident but not complacent about the economy in the year ahead,’ he said at the time.
He also argued the economy was on course for a ‘soft landing’.
‘The soft landing that we have been planning for and preparing for is now looking more and more likely.’
The latest figures show prices rising across every major spending category, adding to the strain on household budgets.
Petrol prices jumped 9.4 per cent in September after rising 14.8 per cent in August. Prices were almost 24 per cent higher than a year earlier.
Transport recorded the biggest annual rise of any major spending category, up 8.7 per cent in the year to September. Housing had the second-largest increase, at 5.2 per cent.
Education costs rose 4.7 per cent, recreation and culture increased 4.5 per cent, and alcohol and tobacco climbed 4.3 per cent.
Insurance and financial services were 3.9 per cent more expensive than a year earlier, while health costs rose 3.7 per cent.
Food and non-alcoholic beverages increased 3.2 per cent, and communication costs climbed 2.3 per cent.
Smaller annual increases were recorded for furnishings, household equipment and services, up 0.8 per cent, and clothing and footwear, up 0.4 per cent.
Shadow Treasurer Tim Wilson said government spending had been been the key driver of the elevated core inflation or underlying inflation.
‘That’s why interest rates keep going up,’ he told News24.
‘Until you contain government spending, Australians will pay more on their mortgages and go to the supermarket and pay more and get less.’
