Australia’s inflation accelerated in October, rising 3.8% year-on-year, its fastest pace since April, according to new data from the Australian Bureau of Statistics (ABS). The figure came in above expectations of 3.6% from a Reuters poll, signaling stubborn price pressures even as the economy moderates.

This is also the first full monthly CPI release, as Australia transitions from quarterly CPI to a comprehensive monthly gauge — giving policymakers a clearer view of inflation trends.

What’s Driving the Inflation Spike?

1. Housing Costs (+5.9%) — the biggest contributor

• Electricity prices surged 37.1% in October as government power-bill rebates were exhausted.
• Rents and new dwelling prices continued to climb.
• Analysts warn that housing affordability is at a record low amid a severe shortage of supply.

2. Food & Non-Alcoholic Beverages (+3.2%)

3. Recreation & Culture (+3.2%)

The trimmed mean inflation, which strips out volatile items, also rose to 3.3%, up from 3.2% — indicating underlying price pressures remain elevated.

Month-on-month, CPI was flat, defying expectations of a slight decline.

What This Means for the Reserve Bank of Australia (RBA)

The RBA held interest rates at 3.6% earlier this month and warned it was nearing the end of its rate-cutting cycle. Governor Michele Bullock said further cuts are possible, but not guaranteed:

“It’s possible that there are no more rate cuts. It’s possible there’s some more.”

The central bank expects inflation to:

• Peak at 3.7% by June 2025,
• Then fall toward the 2–3% target by late 2027.

However, October’s inflation data supports the narrative of “more persistent inflation”, potentially delaying any rate-cut discussions until mid or late 2026, according to Moody’s Analytics.

Economic Conditions Improving

Despite inflation concerns, economic indicators show resilience:

• Business conditions hit their highest level since March 2024, based on NAB survey data.
• The economy grew 1.8% year-on-year in Q2, beating expectations.
• Domestic spending — especially household and government consumption — remains strong.

Q3 GDP data will be released on Dec. 3.

Market Reaction

• S&P/ASX 200: +0.73%
• Australian Dollar: -0.36% to 0.6491 USD
• 10-Year Bond Yield: +4 bps to 4.474%