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Australia’s inflation rate jumped to 3.2% in the year to September, marking the highest annual increase in 16 months as soaring electricity costs hit household budgets across the country, new government data showed Wednesday.
The Consumer Price Index rose 1.3% in the September quarter alone, the sharpest three-month increase since March 2023, according to the Australian Bureau of Statistics. The figures represent a significant reversal from June’s 2.1% annual rate and signal renewed pressure on consumers already stretched by two years of elevated prices.
Electricity bills drove the surge, climbing 9% in the quarter and 23.6% over the year. The increases came as annual price reviews kicked in across all capital cities in July and government rebate programs expired or shifted timing, leaving millions of households facing higher out-of-pocket costs.
“The CPI rose 1.3% in the September 2025 quarter, which is the highest quarterly rise since March 2023. The largest contributor to this quarterly movement was Electricity costs, which rose by 9%,” Michelle Marquardt, ABS head of prices statistics, said.
The electricity price shock stemmed from two forces hitting simultaneously. Power companies implemented their annual price increases in July, while the rollout of Commonwealth Energy Bill Relief Fund rebates stumbled. Households in New South Wales and the Australian Capital Territory didn’t receive their extended rebate payments in July, pushing them into August instead.
Those who missed July payments will get two rebates in October, but the timing gap artificially inflated September quarter figures. The ABS said electricity prices would have risen 5.9% annually if rebate timing remained consistent.
The annual electricity surge primarily reflected what happened in Queensland, Western Australia and Tasmania. Last September, those states offered substantial government rebates — $1,000 in Queensland, $400 in Western Australia and $250 in Tasmania. Those programs have since ended, meaning households now pay the full price.
“This is the highest annual inflation rate since the June 2024 quarter when annual inflation was 3.8%,” Marquardt said.
The broader inflation acceleration shows up in the trimmed mean measure, which economists watch closely because it strips out extreme price movements. Trimmed mean inflation hit 3% annually, up from 2.7% in June and marking the first increase since December 2022.
“Trimmed mean annual inflation was 3% to the September quarter, up from 2.7% to the June quarter. This is the first time Trimmed mean annual inflation has increased since December 2022,” Marquardt said.
Beyond electricity, housing costs overall rose 2.5% in the quarter, while recreation and culture jumped 1.9% and transport climbed 1.2%.
The recreation spike came from Australians traveling during school holidays. Holiday travel and accommodation prices rose 2.9% as families packed domestic hotels and booked flights during the July and late September break periods. International travel to Europe, hitting peak season, pushed airfare and tour prices higher.
Transport costs increased on the back of automotive fuel, which rose 2% in the quarter. The fuel price movement marks a shift from earlier in the year when falling petrol prices helped moderate overall inflation.
Food and non-alcoholic beverages rose 3.1% annually, continuing an elevated trend that’s stretched household grocery budgets. The biggest culprit remains dining out and takeaway, up 3.3% over 12 months.
Coffee, tea and cocoa prices surged 14.6% annually, reflecting global supply constraints from major coffee bean exporters.
“Food inflation continues to be elevated due to higher prices for Meals out and takeaway foods, up 3.3% compared to 12 months ago,” Marquardt said. “Other notable price rises over the past 12 months included the 14.6% rise for Coffee, tea and cocoa. This reflects lower supply from major overseas suppliers of coffee beans.”
The inflation breakdown between goods and services shows different dynamics at play. Goods inflation hit 3% annually, up sharply from 1.1% the previous quarter, driven almost entirely by electricity. Automotive fuel prices subtracted less from the annual figure than they did in June, when they were down 10% annually compared to just 1.6% down in September.
Services inflation reached 3.5% annually, up from 3.3% in June. Rents climbed 3.8% over the year while medical and hospital services rose 5.1%, both continuing to pressure household budgets even as other categories moderated.
The ABS also released its monthly CPI indicator Wednesday, showing a 3.5% increase in the 12 months to September, up from 3% to August. Housing led that measure at 5.6%, followed by alcohol and tobacco at 5.5% and food and non-alcoholic beverages at 3.1%.
Wednesday’s release marks a transition point for Australian inflation tracking. The monthly CPI indicator, which has provided interim inflation snapshots between quarterly reports, will be replaced next month by a complete monthly CPI. The ABS will publish the first full monthly measure on Nov. 26 using October data, making the quarterly report no longer the primary inflation gauge.
The shift reflects the bureau’s effort to provide more timely inflation data in an era when prices can shift rapidly. The complete monthly CPI will offer the same detail and accuracy as the quarterly measure but arrive every four weeks instead of every 13.
The September quarter figures arrive as policymakers weigh how quickly inflation is returning to target ranges. The Reserve Bank of Australia targets inflation between 2% and 3% over time, though it tolerates temporary deviations. At 3.2%, the annual rate sits just above that band.
The inflation acceleration complicates the economic picture. While the labor market remains relatively strong and wage growth has picked up, higher prices for essentials like electricity, rent and food leave less room in household budgets for discretionary spending. The quarterly increase of 1.3% translates to more than 5% on an annualized basis, well above comfort levels if sustained.
Electricity’s outsize role in the September quarter highlights how government policy decisions ripple through inflation data. The rebate programs, designed to ease cost-of-living pressures, create statistical distortions when they start, stop or shift timing. The underlying price increases remain even as rebates mask or amplify them depending on the comparison period.
State-by-state differences add complexity. Capital city price movements varied based on local electricity regulations, rebate programs and market conditions. The quarterly report doesn’t break out city-level detail, but annual comparisons show Queensland, Western Australia and Tasmania faced the steepest increases as last year’s rebates disappeared.
The international context matters too. Australia’s 3.2% inflation rate sits in the middle range globally. Some developed economies have seen sharper declines from pandemic-era peaks, while others continue wrestling with persistent price pressures. Supply chain disruptions, energy market volatility and labor market tightness have played out differently across countries.
For Australian households, the September quarter brought a tangible squeeze. Power bills arriving in August and September reflected both annual price increases and, for many, the absence or delay of expected rebates. Combined with ongoing elevated food prices and rising rents, disposable incomes face pressure even as nominal wages increase.
The October data, due in late November as part of the new monthly CPI, will show whether September’s acceleration continues or moderates. Much depends on electricity price movements, fuel costs and whether services inflation keeps climbing. The new monthly data will give policymakers and households faster reads on where prices are heading, reducing the three-month lag that has characterized Australian inflation measurement for decades.
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