Inflation takes another unexpected turn — and economists are bracing for what comes next.
Australia’s inflation rate ticked up again in October, climbing to 3.8 percent from 3.6 percent in September. It might sound like a small move, but this uptrend is rattling economists who were hoping to see inflation cooling off by now. The biggest price increases came from housing (up 5.9 percent), food and non-alcoholic drinks (up 3.2 percent), and recreation and culture (up 3.2 percent) — three categories that directly affect day-to-day living costs.
This latest report marks a major shift for the Australian Bureau of Statistics (ABS) — it’s the first time the agency has released a fully comprehensive Monthly Consumer Price Index (CPI). According to Michelle Marquardt, head of price statistics at the ABS, the move represents a transition away from the older quarterly system, toward a faster, more dynamic monthly indicator that will become Australia’s primary inflation measure.
A faster read — but with a catch
Australian Statistician David Gruen explained that this change will allow policymakers and the public to get a more immediate sense of inflation trends. However, he cautioned that monthly data tends to be more volatile than quarterly figures. “It’s going to take some getting used to,” he told the ABC, adding that seasonal adjustments — the statistical process used to smooth out normal fluctuations — will improve over time as the dataset grows.
Dr Gruen pointed out that only about half the CPI basket currently has 18 months of history, while the ideal amount for seasonal calibration is roughly three years. That means in some cases, the system might not fully capture recurring seasonal price swings just yet. Still, he emphasized that as more monthly data accumulates, the accuracy and reliability of the measure will continue to strengthen.
Housing remains the inflation heavyweight
The story doesn’t end there. Housing costs have again emerged as the dominant driver behind inflation, rising 5.9 percent in the year to October — up from 5.7 percent in September. Within that, the steepest gains appeared in electricity prices, rental costs, and the price of new homes. Indeed, housing inflation alone contributed 1.2 percentage points to the total annual rate of 3.8 percent.
Digging deeper, electricity costs were a key pressure point. Over the year to October, electricity prices jumped a staggering 37.1 percent, higher than the 33.9 percent seen in September. This spike isn’t just about market prices — it’s also linked to how government rebates are phasing out. Many households have already used up state rebate support, while the rollout timing of the national Energy Bill Relief Fund (EBRF) has also distorted monthly readings.
Interestingly, electricity prices have actually fallen for three months straight — down 6.3 percent in August, 0.4 percent in September, and 10.2 percent in October. But here’s the twist: last year’s unusually large October 2024 price drop of 12.3 percent is no longer part of the current 12-month calculation. That mathematical quirk made the annual number appear hotter. And next month, when the large November 2024 jump (+22.2 percent) drops out of the equation, the annual measure will likely adjust again — showing how fragile and shifting inflation numbers can be.
The Reserve Bank’s dilemma
So what does this mean for the Reserve Bank of Australia (RBA)? The new numbers complicate its balancing act. According to EY chief economist Cherelle Murphy, the RBA is now unlikely to cut interest rates at its upcoming December 9 meeting — its final decision before the summer break. In fact, she said, a rate hike might even be on the table.
Murphy warned that the central bank still needs to bring inflation back toward the middle of its 2–3 percent target range. “The impact of this year’s three rate cuts — totaling 75 basis points — hasn’t fully worked its way through the economy yet,” she explained. If inflation continues to accelerate in coming months, even with the known data volatility, she believes rate increases could return in 2026 rather than cuts.
Economists at other institutions are sounding similar alarms. ANZ’s Adelaide Timbrell said the surprise strength in October’s inflation figures raises the possibility that the interest rate easing cycle has already ended. However, she also noted the RBA is likely to tread carefully, acknowledging that the new monthly CPI still has limited historical data, making seasonal adjustments less reliable. As a result, key measures like the trimmed mean inflation rate could see revisions in the coming months.
Still, the bigger picture is unfolding fast. The October surge may prove temporary — or it might signal that inflation is once again becoming stubborn. And this is where it gets controversial: should the RBA risk another hike when interest-sensitive sectors like housing are already strained? Or should it wait and hope the volatility evens out?
One thing is certain — this new monthly lens on inflation puts both policymakers and households under sharper scrutiny than ever. Every number, every month, now matters.
What do you think? Is the RBA being too cautious, or not cautious enough? Should Australia rely more on monthly CPI data despite its volatility, or stick with the stability of quarterly readings? Share your thoughts — the debate is far from over.
