Australias Inflation Rises to 3.2% as Housing and Power Costs Climb

Highlights:

• Australia’s inflation rose 1.3% in the September 2025 quarter, bringing the annual Consumer Price Index (CPI) increase to 3.2%, according to the Australian Bureau of Statistics (ABS).
• Housing, electricity, and recreation costs led the rise, with electricity prices surging 23.6% annually as state rebates phased out and housing costs climbed 2.5% in the quarter.
• Trimmed mean inflation rose to 3.0%, marking its first increase since 2022 — a development that could influence the Reserve Bank of Australia’s (RBA) interest rate outlook.

Quarterly Jump Signals Inflation Re-acceleration

At the time of writing, the Australian Bureau of Statistics (ABS) reports that the quarterly Consumer Price Index (CPI) in Australia rose by 1.3% in the September 2025 quarter, while over the twelve months to the same quarter the CPI increased by 3.2%. The figures mark a resurgence in price pressures after earlier softness.

What’s Driving the Increase?

Strong gains in key cost categories pushed the inflation uptick: housing costs rose 2.5% in the quarter, recreation and culture increased by 1.9%, and transport prices jumped by 1.2%. On an annual basis, goods inflation jumped to 3.0%, driven heavily by electricity, which surged 23.6% in the past year, while automotive fuel continued to decline (-1.6%). Another underlying inflation gauge — the “trimmed mean”, which strips out the most volatile items — rose to 3.0% annually, up from 2.7% in the previous quarter.

Implications for Policy and Households

The uptick in inflation comes at a pivotal moment for the Reserve Bank of Australia (RBA) — which has long targeted annual inflation of 2-3%. With housing, power and leisure costs accelerating, households may begin feeling more price squeeze, and the RBA may face renewed pressure to hold or adjust its interest-rate stance.

Outlook and Key Risks

While some areas like rents have eased (rental prices rose 3.8% annually, the lowest since December 2022) and new-dwelling prices remain subdued, inflation remains “sticky” thanks to the large jump in electricity and property-rates charges. If energy rebates continue to roll off and global cost pressures remain elevated, Australia may see inflation pressures persist into 2026 — putting the RBA in a delicate position.

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