^{Getty Images}

Australia’s inflation climbed more sharply than expected in October, marking its fastest acceleration since April and signaling that price pressures remain more stubborn than policymakers had hoped. The latest figures from the Australian Bureau of Statistics show the consumer price index rising 3.8 percent year on year, outpacing economists’ forecasts of a 3.6 percent increase and reinforcing concerns about the persistence of inflation across key sectors.

The monthly CPI release represents the country’s full transition toward using monthly price data as the primary measure of headline inflation. This shift offers more frequent insights into household cost trends and captures a broader range of expenditure categories each month, giving policymakers and analysts a clearer view of inflation dynamics. Moody’s Analytics noted that both headline and underlying inflation readings were “slightly hotter” than earlier indicators had suggested.

Housing Costs Lead Accelerating Price Pressures

Housing remained the most significant driver of inflation, with prices rising 5.9 percent in October. The surge was amplified by a dramatic 37.1 percent rise in electricity costs as many households exhausted government energy rebates. Rent inflation and higher prices for newly built dwellings also added to the upward momentum. Economists warn that Australia’s housing affordability crisis continues to deepen, in part due to record-high national home prices and ongoing structural undersupply.

Food and non-alcoholic beverages, recreation and cultural services also contributed to higher living costs, rising 3.2 percent compared with the previous year. Underlying inflation — measured by the trimmed mean, which excludes volatile categories — ticked up to 3.3 percent, reflecting broad-based upward price pressure.

Despite the annual increase, the month-to-month headline CPI reading was unchanged from September, defying expectations of a slight contraction.

Central Bank Maintains Cautious Path as Inflation Persists

The Reserve Bank of Australia opted to keep the cash rate at 3.6 percent earlier this month, citing stronger-than-expected consumer demand and renewed momentum in the housing market. Governor Michele Bullock recently indicated that the current interest-rate cutting cycle may be nearing its conclusion, warning that inflation will likely remain above the RBA’s 2 to 3 percent target range until the second half of next year.

The central bank projects headline inflation to peak at 3.7 percent in mid-2025 before gradually easing toward the midpoint of the target range by late 2027. Analysts at Moody’s believe the October reading adds weight to the “persistent inflation” narrative, making early rate-cut discussions unlikely before mid-2026.

Economic Resilience Gives RBA Room to Hold Rates

Australia’s broader economic backdrop remains comparatively strong. Business conditions improved in October, reaching their highest level since March, according to a National Australia Bank survey highlighting better profits and sales performance. Meanwhile, GDP expanded 1.8 percent year on year in the second quarter, accelerating from 1.3 percent in the previous quarter. Domestic consumption — including government spending and household demand — has continued to underpin growth.

Markets responded modestly to the inflation data. The S&P/ASX 200 gained 0.73 percent, while the Australian dollar slipped 0.36 percent to 0.6491 against the U.S. dollar. The yield on Australia’s 10-year government bond rose to 4.474 percent, reflecting investor expectations of prolonged tight monetary conditions.

With inflation still running hotter than expected and growth indicators showing resilience, the RBA is positioned to maintain a cautious stance as it navigates the final stretch of its inflation-fighting cycle.