Australia’s consumer inflation accelerated faster than expected in October, rising at its quickest pace in seven months and reinforcing concerns that cost pressures remain stubborn across the economy.
The Australian Bureau of Statistics said Wednesday that the consumer price index increased 3.8 percent year over year, surpassing economists’ expectations and marking a significant jump driven largely by steep gains in housing and energy costs.
The surprising rise in Australia’s consumer inflation adds new complexity to the Reserve Bank of Australia’s policy path as it weighs signs of a strengthening economy against pressures that risk delaying any potential easing cycle.
The latest reading is the first full release under the ABS’s expanded monthly CPI program, which now serves as the government’s primary inflation gauge as Australia transitions away from its traditional quarterly model.
Analysts had expected the October figure to come in at three point six percent, according to a Reuters poll, but higher than anticipated increases across key spending categories pushed inflation above projections.
Housing remained the largest contributor to Australia’s consumer inflation, climbing 5.9 percent from a year earlier.
A sharp 37.1 percent surge in electricity prices, fueled by the expiry of government energy rebates for many households, placed additional weight on already strained budgets.
Prices for food, nonalcoholic beverages and recreation also continued to rise. “This jump is broader than what we saw earlier in the year,” said Karen Doyle, a senior economist at Westbridge Analytics.
“Electricity costs were expected to rise, but the pace of growth in rents and new dwelling prices suggests demand and supply pressures are still very much alive.”
Economists said the October numbers demonstrate that inflation is decelerating more slowly than previously assumed, posing a challenge for policymakers trying to balance economic resilience with price stability.
“The concern for the RBA is not just the headline figure, but the persistence of underlying inflation,” said Martin Jacobs, an economics lecturer at the University of Melbourne.
“The trimmed mean at 3.3 percent shows that core inflation is not easing as quickly as policymakers would like, and that increases the risk of renewed price stickiness heading into early next year.”
Analysts note that Australia’s consumer inflation is still down from its peak last year, but the pace of decline has plateaued in recent months.
The October reading of zero percent month over month also suggests a stabilization in short term price pressures, but not at the level the central bank would prefer.
“Flat monthly CPI isn’t necessarily comforting when annual rates remain above target and the underlying components continue to climb,” said Jacobs.
October’s consumer data offers a mixed picture. While the overall CPI showed no month to month increase, several categories displayed notable year over year gains.
Electricity: 37.1 percent
Housing (overall): 5.9 percent
Food and nonalcoholic beverages: 3.2 percent
Trimmed mean inflation: 3.3 percent
By comparison, Australia’s inflation in April had risen at a similar rate, marking the last time price growth reached this level.
Analysts point out that much of the improvement seen earlier in the year stemmed from government subsidies and easing supply chain pressures, which have now faded.
“We’re entering a phase where temporary relief is no longer as effective,” said Sarah Lin, market strategist at Pacific Macro Group.
“Global energy markets remain volatile, housing demand is strong and domestic consumption has recovered faster than anticipated.
Those conditions create a structural environment where Australia’s consumer inflation could remain elevated longer than expected.”
National Australia Bank’s recent survey also showed the strongest business conditions since March 2024, with companies reporting better sales and profits. The rebound in spending, while positive for growth, risks reinforcing upward price pressures.
While policymakers examine data sets, households and small businesses say the effects of rising costs are immediate and tangible.
“We’re cutting back on almost everything,” said Melbourne resident Jack Murray, a father of two who reported a significant increase in his electricity and grocery bills over the past year. “It feels like the bills keep rising even when wages don’t.”
Small business owners expressed similar concerns. Emma Patel, who runs a neighborhood café in Perth, said her operating expenses have climbed steadily since midyear.
“Electricity and supply costs have gone up across the board,” Patel said. “We’ve tried to avoid raising prices, but if inflation keeps rising, it will become impossible to absorb these costs without passing some of it onto customers.”
Economists warn that continued price strain on households could eventually soften consumer demand, which has been surprisingly strong in recent months.
The Reserve Bank of Australia kept interest rates at 3.6 percent earlier this month, but policymakers signaled a cautious stance toward easing given the persistent strength in household spending and the renewed uptick in inflation.
Analysts say the October data makes it less likely the central bank will pivot toward rate cuts in the near future. “Unless we see a meaningful drop in underlying inflation early next year, any talk of rate cuts will remain premature,” said economist Karen Doyle.
“The RBA will want clear evidence that Australia’s consumer inflation is on a sustained path toward the two to three percent target range.”
Some analysts expect inflation to moderate again in early 2025 as energy markets stabilize and retail inventories normalize.
But others caution that structural issues, including housing supply shortages and high global commodity prices, could keep inflation higher for longer.
The October surge in Australia’s consumer inflation underscores the continuing challenge of taming price growth even as economic conditions improve.
With energy, housing and essential goods driving much of the increase, policymakers remain wary of easing too quickly, and households continue to feel the strain of elevated living costs.
As the RBA navigates its next steps, the direction of inflation in the coming months will determine how long Australians must endure heightened price pressures.
