September inflation rose far more than expected, largely driven by electricity prices. Some of this is a one-off effect, but the trimmed mean suggests underlying pressures are building anyway

Inflation is on the rise. 

In fact, it is rising more than expected.

The monthly consumer price index rose +3.5% in September from a year ago, up from +3.0% in August. This was higher than the expected +3.1% increase, and is even further outside the RBA’s 2–3% target range. This September increase is the highest inflation level since July 2024. It was driven primarily by rising housing and transport costs. Housing inflation rose to +5.6% from +4.5% in August, and is now its the highest since November 2023. Driving the increase was a +34% surge in electricity prices, as state government rebates ended. At the same time, annual electricity price reviews in July lifted these prices across all capital cities.

Meanwhile, the quarterly CPI change was recorded as +3.2% and more than the expected +3.0%. This was up from +2.7% in the June quarter.

The RBA meets next on Tuesday, November 4, 2025 and they won't be pleased by this accelerating trend. Inflation is too hot to deliver any interest rate relief.

Markets had priced in no chance of a rate cut. Now they may have to think about the possibility of a rate hike. But holding everyone back will be a wait-and-see impulse about what the electricity price changes settle down to. Household who have borne the brunt of these will be gun-shy. They already have inflation expectations higher than actual inflation and these aren't likely to rest lower any time soon. And businesses who have also had to take the electricity price hits - without rebates - will be desperate to recover some of this too.

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This is the final time the quarterly CPI as the primary measure of headline inflation will be produced. The ABS has now transitioned to a complete monthly measure of the CPI as Australia’s primary measure of headline inflation. Forn October, only the monthly version will be released.