Australia Inflation Rate Picks Up to 4%

Australia’s annual inflation rate accelerated to 4.0% in August 2026 from 3.5% in July, slightly below market expectations of 4.1%, marking the highest rate in three months. The reading also moved further above the central bank’s 2-3% target range. Housing inflation rose to 5.7% from 5.0% in July, while transport inflation accelerated to 5.6% from 1.6%, driven by higher automotive fuel prices and the unwinding of the remaining federal government fuel excise relief measures in August. Meanwhile, food and non-alcoholic beverages inflation eased to 3.0% from 3.2%, while clothing and footwear inflation stood at 2.6%. The trimmed mean CPI was unchanged at 3.6% year-on-year, remaining at its highest level since September 2024 and in line with forecasts, while the weighted median also held at 3.6%. On a monthly basis, the CPI rose 0.4%, below expectations of a 0.5% gain and slowing from a 1.0% increase in July.

The annual inflation rate in Australia slowed to 3.5% in July 2026 from 3.8% in June, but remained above both expectations of 3.3% and the central bank's 2–3% target range. It was the softest increase since November 2025, as goods inflation moderated to an eleven-month low of 3.2%, while services inflation also eased to 3.7% from 4.0%. Housing inflation eased to an 11-month low of 5.0% (vs 6.8% in June), with electricity prices rising the least in four months. Inflation also eased for food and non-alcoholic beverages (3.2% vs 3.3%). Meanwhile, inflation accelerated for transport (1.6% vs 0.1%), while furnishing inflation remained steady at 1.6%. The trimmed mean CPI stood at 3.6% yoy, still the highest since September 2024 and above expectations of 3.5%, while the weighted median CPI rose 3.6%, after a 3.7% rise in June. On a monthly basis, the CPI rose 1.0%, marking the first monthly increase and the fastest pace in four months, surpassing expectations of a 0.8% rise.

Australia’s Q2 CPI reading came in “a touch softer” than expected, according to Reserve Bank of Australia Assistant Governor Sarah Hunter. She said headline inflation has continued to ease, although underlying price pressures, particularly from housing and services, remain persistent. Wednesday’s releases showed the country’s annual inflation eased to 3.9% in Q2 from a two-year high of 4.1% in Q1, though it remained well above the central bank’s 2–3% target band. Meanwhile, June CPI fell to a four-month low of 3.8%, driven largely by weaker goods inflation. Hunter also noted that the labour market is still tight, supporting elevated wage growth, and reiterated that monetary policy is primarily designed to manage demand rather than supply-driven costs such as energy or housing.