Annual inflation has gone the wrong way again. Headline CPI is now 4.3%, up from 4.0%, and the trimmed mean measure, which strips out the wildest price swings, sits at 3.6%. Both are above the Reserve Bank’s 2% to 3% target band. For borrowers already paying a lot of their income to the bank, that matters more than the headline number suggests.
Key numbers
- Headline CPI: 4.3% (previously 4.0%)
- Trimmed mean: 3.6% (from a revised 3.5%)
- Cash rate: 4.60%, the highest since 2011
- Market odds of a hike on 3 November: roughly 73%
What changed and what didn’t
The cash rate is 4.60% after the 29 September increase, the fourth this year. The next board meeting is on 2 and 3 November, and markets put the odds of another 25-basis-point rise at around 73%. Two major banks now forecast that move.
What has not changed is the governor’s view that inflation will stay elevated until late 2027. That is a long runway for a policy rate to sit high, and borrowers should plan around it rather than around a quick reversal.
Look past the headline: which prices are sticky
The rise is not evenly spread. Transport led at 8.7%, housing rose 5.2% and education 4.7%. Inside those groups, fuel jumped 23.6% on global oil costs, electricity bills rose 12.8% after federal rebates ended, insurance climbed 5.4% and rents advanced 3.6%.
Some of that is easier to look through than the rest. Fuel is driven by overseas oil prices, which the RBA cannot influence. The end of the power rebates is a one-off step change in the price level. Neither is the kind of domestic demand pressure a rate hike is designed to cool.
The trimmed mean is the catch for anyone hoping the central bank will shrug this off. It is rising too, and it removes the biggest outliers. If underlying inflation is drifting up, the argument that this is all petrol and power gets weaker.
The case for and against another hike
The hawkish case rests on weak productivity, strong investment spending and the energy and geopolitical backdrop. Put simply, if the economy cannot produce more without prices rising, the bank has to hold demand down for longer.
The sceptics point the other way. Unemployment is rising, and the earlier increases have not fully worked through household budgets yet. Cutting demand further when the lag from past hikes is still building risks overshooting. A broker working with stretched borrowers describes the RBA as walking a narrow line between inflation and a weaker economy, and that is a fair read.
Commentary has split along predictable lines. One camp treats the print as proof that rates must keep rising. The other treats it as supply-driven noise that rates cannot fix. The truth is probably a blend: part of the inflation is imported, part is domestic, and the bank cannot easily tell which part will fade.
How this compounds for households
Here is the part most coverage skips. A rate rise does not arrive alone. The same households facing a 25-basis-point lift are also paying more for fuel, power and insurance. Rent has risen 3.6% too, which squeezes those saving for a deposit.
For borrowers already committing roughly half their income to repayments, there is little slack to absorb all of it at once. That is how mortgage stress builds: not from one shock, but from several small ones landing in the same quarter.
A useful rule of thumb: if your buffer would not survive another rate rise and a further jump in your energy bill in the same month, treat that as a warning sign now, not later.
Where the pain is landing
Hobart recorded the steepest city inflation at 5.3%, while Melbourne was lowest at 4.0%. The gap shows how local factors, from energy mix to housing costs, change the experience of the same national number. It also hints that the policy effect will be uneven, with some households feeling the squeeze far sooner than others.
For a wider look at how the cash rate flows into repayments, see our guide to RBA interest rates and repayments, and our earlier piece on why rate pain is back and worse may be ahead.
Bottom line
The base case is another small rise in November, with a real chance the bank waits and watches the jobs data first. Either way, the message is that inflation is not yet beaten and rates are unlikely to fall quickly.
The risk to that view runs both ways. If energy prices fall back, the pressure eases. If unemployment climbs faster than expected, the bank may be forced to blink. Neither is a safe bet to plan your budget around.
Your next step: run your repayments at a rate 0.5 to 1.0 percentage point above today’s and see whether the numbers still hold. If they do not, speak to your lender or broker before the November meeting, not after. Subscribe to the newsletter for weekly updates on rates and credit.
General info, not financial advice.
