Australia Inflation Expectations Climb to 8-Month High

Australia’s consumer inflation expectations rose to 5.0% in February 2026 from 4.6% in the previous month, marking the highest level since last June. The jump followed the Reserve Bank of Australia’s decision to lift the cash rate by 25bps to 3.85% at its first policy meeting of the year, the first rate hike since November 2023. Policymakers pointed to renewed cost pressures that intensified in late 2025, driven by elevated service expenses and a tight labor market. The central bank signaled inflation will remain above its 2–3% target band for an extended period, with both headline and core readings exceeding target and policymakers indicating it will take further action to curb inflation. Projections suggest inflation in Australia may not return within the band until mid-2027.

Australia’s consumer inflation expectations stood at 4.6% in January 2026, little changed from 4.7% in the previous month, signaling households still foresee heightened price pressures. The latest reading followed the Reserve Bank of Australia’s decision to leave the cash rate unchanged at 3.6% for a third straight meeting in December. During the gathering, policymakers noted inflation has eased sharply from its 2022 peak, though recent data show renewed momentum. Headline CPI slowed to 3.4% yoy in November, the lowest since August, but remained above the RBA’s 2–3% target. Trimmed mean CPI also moderated to 3.2% from October’s eight-month high of 3.3%. Governor Michele Bullock recently highlighted that September-quarter inflation was slightly stronger than expected, with temporary factors at play but signs of persistence across components. The board judged risks to inflation have tilted modestly upward, while downside risks, particularly from overseas, have eased.

Australia’s consumer inflation expectations increased to 4.7% in December 2025 from November’s three-month low of 4.5%, reflecting broader and persistent price pressures. The rise followed the Reserve Bank’s decision earlier this month to hold its cash rate steady at 3.6% for a fourth straight meeting. Governor Michele Bullock recently noted that Q3 inflation was slightly stronger than anticipated, with some temporary drivers but also signs of persistence in certain categories. She highlighted the timing of electricity rebates, which temporarily suppress headline inflation but push it higher once they expire. Meanwhile, annual inflation accelerated to 3.8% in October from 3.6%, the highest in ten months and still above the RBA’s 2–3% target range. Bullock viewed that if inflation proves persistent and fails to return toward the intended corridor, it could raise concerns over financial conditions and prompt the board to consider holding rates steady or eventually lifting them.