Australians hoping for relief at the checkout might have to wait a little longer. The latest data shows inflation has risen again, suggesting that the battle against rising prices is far from over — and that the Reserve Bank may keep interest rates higher for longer.
Inflation Edges Higher in Latest Data
The Australian Bureau of Statistics (ABS) reported that the monthly consumer price index (CPI) rose 4.1% in the year to December, up from 3.9% the previous month. The increase marks a reversal of the steady declines seen over most of 2025, and economists warn it could complicate plans for rate cuts later this year.
Higher prices for housing, insurance, education, and food were among the main contributors to the latest jump. While global energy prices have eased, domestic cost pressures — especially in the services sector — remain stubbornly high.
The figures come just weeks before the Reserve Bank of Australia’s next board meeting, where policymakers will assess whether progress on inflation is stalling.
Economists Say Inflation Still Too High
Market analysts say the uptick in inflation underscores how “sticky” underlying price growth has become. Services such as childcare, medical expenses, and insurance continue to rise faster than expected, offsetting lower fuel and transport costs.
Economists at several major banks have now pushed back their forecasts for the first rate cut, with some suggesting it may not happen until late 2026. The RBA has repeatedly said it won’t move until inflation is “sustainably” back within its 2–3% target range — something that still appears several months away.
The data also showed that trimmed mean inflation, a measure closely watched by the RBA because it filters out volatile price swings, rose 4.3% over the year — another sign that price pressures are proving persistent.
Cost of Living Still Biting Households
For ordinary Australians, the latest inflation figures come as little surprise. Groceries, insurance premiums, rent, and energy bills continue to stretch household budgets. Many families are cutting back on non-essentials, while small businesses are reporting weaker consumer spending heading into 2026.
Despite the challenges, economists believe inflation will gradually ease as the effects of higher interest rates continue to slow the economy. But they warn that the process will be uneven — and patience will be required.
What It Means for Borrowers
The latest data has dampened hopes of early rate cuts. Markets had been pricing in a possible move by mid-year, but with inflation heading in the wrong direction, the Reserve Bank is more likely to stay cautious.
For now, it looks like Australians will be waiting a little longer for their next round of financial relief — as the long fight against inflation continues.
