Pundits are forecasting an interest rate hike next week, after ABS data revealed an uptick in the inflation rate.
Treasurer Jim Chalmers
Australia’s inflation rate has increased again ahead of the Reserve Bank’s monetary policy board meeting early next week.
ABS data, released Wednesday, revealed the consumer price index rose to 3.8 per cent in the 12 months to December 2025, up from 3.4 per cent from the previous months annual rate.
The Reserve Banks preferred measure the trimmed inflation rate, was recorded at 3.3 per cent; outside the target range of their 2-3 per cent target rate.
Last Updated: 5 May 2026
Compared to other cities, Western Australia contributed the second largest portion to the increase with 4.4 per cent, followed by Queensland at 5.2 per cent.
The WA figure was up from 2.8 per cent in the twelve months to November 30.
Factors contributing to the rise were food and beverage (3.5 per cent), rent and housing (3.9 per cent) along with recreational and culture (4.4 per cent).
Last Updated: 28 January 2026
House prices were 5.5 per cent in December, attributing to growth was electricity prices, rising 21.5 per cent in the 12 months to December.
This was up from a 19.7 per cent rise in the previous months data, largely due to state related electricity rebates in WA and in Queensland according to the bureau.
What the banks say
New dwelling prices rose three per cent in the 12 months to December 2025, while rents rose 3.9 per cent during the period.
Despite the increase, builders in some cities have raised base prices in response to increased demand, leading to a rise of 0.2 per cent for new dwellings.
However, Master Builders chief economist Shane Garret said its still not enough.
“With housing costs up by 5.5 per cent compared to a year ago, new home costs growing at their fastest pace in 14 months and rents climbing another 3.9 per cent, housing affordability is under greater strain, even before a possible interest rate rise,” he said.
Mr Garrett said the inflation rates were higher than he anticipated.
“This inflationary surge shows that price pressures were much tougher at the end of 2025 than anticipated by the Reserve Bank,” he said.
“There is now a real threat that interest rates could start increasing as early as next week.”
Deloitte access economics partner Stephen Smith said the rising inflation will play a strain on Australia’s economy.
“Today’s data shows that inflation is still running slightly too hot, turning what was previously a lineball interest rate call into a likely rate hike when the RBA meets next week,” he said.
“But it also raises bigger questions about Australia’s capacity to grow and the economy’s speed limit, and should leave us asking: ‘is this as good as it gets?’”
What the leaders say
Though the inflation increase concerned the experts, Treasurer Jim Chalmers said in a statement that he expected inflation to decline.
“Today’s data shows our inflation challenge reflects a mix of temporary factors and some more persistent pressures,” he said.
“The data also reflects the recovery we’ve seen in the private sector.”
“When we came to office, headline inflation was 6.1 per cent and rapidly rising, it’s now much lower than that.”
But the coalition said that Dr Chalmers was one of the reasons for the rapid rise.
Opposition deputy leader and shadow treasurer Ted O’Brien said the ABS data showed inflation was being driven by government policy.
“While the Treasurer is desperate to shift the blame, there is no doubt this Jimflation crisis is homegrown,” he said.
“Government spending is growing 13 times faster than the Coalition budgeted for and has reached its highest level outside recession in 40 years.”
The Reserves bank meeting will be held on the February 3, 2026.
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