Reserve Bank interest rates: Inflation rises to 4.3 per cent in year to September, puts pressure on fifth hike

Inflation has surged to 4.3 per cent in the year to September, according to data released Wednesday by the Australian Bureau of Statistics.

That was up from 4 per cent in the previous month, with the ABS numbers showing fuel and building material costs hardest hit.

Economists had expected headline inflation to lift as high as 4.2 per cent.

It comes ahead of the Reserve Bank’s November meeting next week.

The RBA focuses on core inflation, stripping out volatile items such as fuel, which was stubbornly high at 3.6 per cent.

Deloitte, KPMG and BDO were all quick to warn a fifth interest rate hike was likely following the data.

“Australia was already dealing with persistent domestic inflation before the energy crisis, reflecting capacity constraints and weak productivity growth,” BDO chief economist Anders Magnusson said.

“External pressures from higher energy prices and disrupted global supply are adding another layer of inflation on top.

“Underlying inflation remains too high.”

KPMG’s Brendan Rynne said the upswing had caught markets off guard.

“It is clear pricing pressures in the Australian economy are growing, not weakening,” he said.

But VanEck’s Russel Chesler said the RBA might not move next week.

“We believe the RBA may still want to see the effect of their 25 basis-point increase which was only made on 29 September,” he said.

“The market, which is predicting an 80 per cent probability of an increase, may be getting ahead of itself and placing too much emphasis on statements made today by (RBA officials) Michele Bullock and Andrew Hauser.”

The Reserve Bank has lifted the cash rate four times this year in a bid to stop inflation’s bounce back that started in late 2025 and has been worsened by war in the Middle East.

Core inflation, the bank’s preferred measure as it strips out volatility, has now been above the 3 per cent target band for almost all of the past five years.