Australia’s inflation surged to 3.2% in the third quarter of 2025, marking the fastest increase since mid-2024, according to the Australian Bureau of Statistics. This rise exceeded the 3% forecast by economists and the previous quarter’s 2.1% increase.
The biggest price rises were seen in housing, transport, and recreation, with housing costs continuing to escalate due to supply shortages and higher rents. The trimmed mean inflation rate, which excludes volatile price changes, rose to 3.0%, its first increase since December 2022.
Headline inflation now sits above the Reserve Bank of Australia’s (RBA) 2%–3% target range for the first time since early 2024, raising concerns about how long it will take to tame persistent price pressures. In response, the S&P/ASX 200 index fell 0.76%, while the Australian dollar rose 0.21% against the U.S. dollar.
Josh Gilbert of eToro said the data will “almost certainly” delay expectations of RBA rate cuts. “This reinforces that the disinflation process is stalling while bringing stagflation concerns into the conversation,” he added.
The RBA had already cautioned that inflation might be higher than expected due to sticky prices in housing and services. Governor Michelle Bullock noted the rises were “a little higher than we were expecting,” but denied inflation was “running away.”
Despite inflation pressures, Australia’s economy grew strongly, with GDP expanding 1.8% year-on-year in the second quarter. The RBA kept interest rates steady, indicating a cautious approach amid ongoing inflation concerns and global uncertainties.
External factors like supply chain issues and energy price fluctuations continue to influence inflation. The Reserve Bank will closely monitor developments before deciding on future policy changes.