Australia's September inflation rises to 4.3% as housing and fuel push prices up, sharpening pressure before the RBA's November 3 decision

The Australian Bureau of Statistics reported on October 28 that Australia's consumer price index (CPI) rose 4.3% in the 12 months to September, up from 4.0% in the 12 months to August and above the market forecast of 4.2%. It is the last key inflation reading before the Reserve Bank of Australia's November 3 policy decision, and it sharply increased expectations of another rate rise.

Housing and transport drove the rise

ABS head of price statistics Rachael McCririck said housing was the largest contributor to annual inflation in September, rising by 5.2%, reflecting rising costs for both new dwellings and electricity; new dwelling prices rose 4.7% in the 12 months to September. Transport was the second largest contributor, rising by 8.7%, due to higher automotive fuel prices: fuel prices rose 9.4% in September on a monthly basis, down from 14.8% in August, driven by higher world oil prices. The central bank's preferred core measure, the trimmed mean, was 3.6% on an annual basis, up from a revised 3.5% in August.

Central bank officials had already warned the outlook worsened

The cash rate already stands at 4.6%, its highest level in 15 years, and it feeds through to lending rates, including home loans. Reserve Bank deputy governor Andrew Hauser described the numbers as too high when he appeared before Senate estimates on Wednesday, shortly after the data was published, warning of a serious risk that expectations of persistently higher prices could take hold among households and businesses, while noting that he did not believe that risk had yet materialised. He had warned last week that the inflation outlook looked materially worse than the Bank had forecast in August. After the release, market pricing put the chance of a November 3 rise at about 85%. This article reports published data and market reaction only and makes no forecast of the Bank's decision.