Australia inflation rises to 4.3%, putting RBA rate hike in play

Australia's consumer prices rose 4.3 per cent in the 12 months to September 2026, up from 4.0 per cent in August, the Australian Bureau of Statistics (ABS) reported on Wednesday, October 28, 2026. The ABS measure of underlying inflation that the Reserve Bank of Australia (RBA) watches most closely, the trimmed mean, also edged up, and in the September quarter it rose 1.0 per cent, above the 0.8 per cent the central bank had forecast in August. Fuel was the biggest driver, with automotive fuel prices up 23.6 per cent from a year earlier on higher world oil prices. After the release, financial markets priced in a high chance that the RBA will raise its cash rate from 4.60 per cent when its board announces its decision on Tuesday, November 3.

Central banks around the world are dealing with a renewed burst of inflation driven by oil. For Australia, the problem is that price rises are no longer limited to petrol. The trimmed mean strips out the biggest price swings in either direction, so a rise in that measure suggests that higher costs are spreading through the wider economy. A 1.0 per cent quarterly rise, a quarter of a point above what the RBA itself expected only two months ago, is the kind of surprise that pushes a central bank to act.

A rate rise would add to pressure on Australian households, many of whom hold variable-rate mortgages that reprice quickly when the cash rate moves. The RBA has to weigh that pain against the risk that inflation, already well above its 2 to 3 per cent target band, becomes entrenched in wage and price expectations. Big banks have moved towards forecasting a hike, which shows how much the September figures shifted views.

The data also fits a global pattern. Several central banks have raised rates in recent weeks as energy prices climbed, and investors are watching for the US Federal Reserve's decision and new US growth and inflation data later this week. When major economies tighten together, global borrowing costs rise and money tends to flow towards higher-yielding markets.

For Indian readers, the link is oil. India buys much of its crude from abroad, so the same oil shock that is lifting Australian inflation is a risk for Indian prices and the rupee. Australia is also an important destination for Indian students and migrants, who would feel higher rents and loan rates there.

Short-term: Australian borrowers face the prospect of a rate rise on November 3, and markets have already moved to price it in. The Australian dollar and bond yields tend to rise when hike expectations jump.

Long-term: If the RBA raises rates and inflation keeps running above target, a series of further increases could follow, slowing economic growth. A fall in oil prices would ease the pressure.

Who is affected: Australian households with mortgages and renters, businesses that borrow, investors in Australian assets, Indian students and workers in Australia, and Indian exporters who sell into the Australian market.

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