The annual consumer price index (CPI) has risen to 3.2 per cent in the September quarter according to new data from the Australian Bureau of Statistics (ABS), with some saying this is higher than anticipated.
Much of the boom is driven by rising electricity costs following the wind-back of electricity rebates in 2025.
CPI has also lifted 1.3 per cent quarter-on-quarter, which ABS head of prices statistics Michelle Marquardt said is the highest quarterly rise since March 2023.
“The largest contributor to this quarterly movement was electricity costs, which rose by 9.0 per cent,” Marquardt said.
The annual 3.2 per cent rise in inflation in the September quarter followed a 2.1 per cent lift in the June 2025 quarter.
“This is the highest annual inflation rate since the June 2024 quarter when annual inflation was 3.8 per cent,” Marquardt said.
Housing prices, which also includes electricity costs, was the lead driver for both annual and quarterly rises in the September quarter – at 4.7 per cent and 2.5 per cent respectively.
Clothing and footwear inflation was on the lower end, rising 0.5 per cent QoQ and 2.4 per cent annually. Quarterly, this is the third-lowest prices growth, behind education (0.1 per cent) and health (flat).
The main contributor to the quarterly rise in clothing and footwear prices was accessories (up 6 per cent), driven by rises in gold and silver jewellery prices. Garments (down 0.7 per cent) and footwear (down 2.7 per cent) fell, driven by discounting.
The annual 2.4 per cent lift in clothing and footwear was driven by accessories (up 7 per cent) and garments (up 1.4 per cent).
When prices for some items move by large amounts, the ABS pointed out that measures of underlying inflation like the trimmed mean can give more insights into how inflation is trending.
Marquardt said that trimmed mean annual inflation across all categories was 3 per cent in the September quarter, up from 2.7 per cent reported in the June quarter. “This is the first time Trimmed mean annual inflation has increased since December 2022,” she said.
The annual rise in electricity costs is primarily related to households in Queensland, Western Australia and Tasmania having higher out-of-pocket costs in September quarter 2025 than they did in September quarter 2024.
In September quarter last year, State Government electricity rebates were in place for Queensland ($1,000), Western Australia ($400) and Tasmania ($250). Over the year, those rebates have been used up and those programs have finished.
Excluding the rebates, electricity prices would have risen by 5.9 per cent in the last 12 months following annual price reviews.
According to KPMG chief economist Dr Brendan Rynne, the annual bump up in inflation dampens hope for a rate cut next week by the Reserve Bank of Australia.
“We knew there was going to be an uptick in inflation once electricity rebates were wound back, but unfortunately today’s spike is much higher than any of us anticipated and provides the justification for the RBA to sit on its hands in relation to further rate relief,” Dr Rynne said.
“However from KPMG’s perspective, the current cash rate remains too restrictive and when looking at the labour market it is clear that the momentum for employment growth is waning.
“A closer look at the labour market data also shows that the vast majority of employment in the last twelve months has been in the non-market sector which suggests that further rate cuts are absolutely needed for the private side of the economy to kick start its growth.”