Core inflation climbed one per cent in Australia in the latest quarter as the head of the Reserve Bank warned that underlying inflation is still too high.

The September quarter increase in the trimmed mean was in line with economist expectations but exceeded the central bank’s forecast for a 0.8 per cent increase.

On an annualised basis, the trimmed mean rose 3.6 per cent.

Headline inflation was hotter than expected by the market, at 1.3 per cent over the quarter.

Markets had upped their bets for a November hike after hawkish remarks in the past week by the RBA’s deputy governor, Andrew Hauser, and chief economist, Sarah Hunter.

At the same time as the data was published by the Australian Bureau of Statistics, RBA governor Michele Bullock was appearing alongside Mr Hauser, Dr Hunter and other top officials at a Senate estimates hearing.

Elevated underlying inflationary pressures were a sign that the labour market was still tight, Ms Bullock said.

“The Monetary Policy Board will meet next week,” she said.

“We’ll discuss our assessment of the flow of data and how the risks are unfolding. A key question is whether the tightening in monetary policy to date will be sufficient to bring inflation back to target in a reasonable time.”

Monthly headline inflation rose 4.3 per cent on an annual basis, up from four per cent in the 12 months to August.

“Housing was the largest contributor to annual inflation in September, rising by 5.2 per cent,” said Rachael McCririck, ABS head of price statistics.

Transport was the second largest contributor, rising by 8.7 per cent annually, due to higher fuel costs.

Five years of interest rates: From record lows to household pain

Australia’s official interest rate has climbed from a record low of 0.10 per cent to 4.60 per cent in five years, with borrowers enduring a series of sharp increases and only a brief period of relief.

• 2021: The Reserve Bank held the cash rate at a record low of 0.10 per cent throughout the year.
• 2022: Eight consecutive increases between May and December lifted the rate to 3.10 per cent.
• 2023: Four further increases took the rate to 4.35 per cent by November.
• 2024: The RBA held rates steady at 4.35 per cent for the entire year.
• 2025: Three cuts, in February, May and August, brought the cash rate down to 3.60 per cent.
• 2026: Four increases, in February, March, May and September, lifted the cash rate to 4.60 per cent, its highest level since November 2011.

For older Australians, the impact has been mixed. Higher interest rates have increased repayments for those still carrying mortgages, while retirees with savings accounts and term deposits may have benefited from better returns.

The four increases in 2026 have now more than wiped out all three cuts delivered in 2025, leaving Australians facing the possibility of another rise when the Reserve Bank meets in November.

Source: Reserve Bank of Australia, cash rate target history

With Starts at 60 Writers