Surprise November fall but inflation still outside RBA comfort zone

Key points

Consumer prices rose 3.4% over the year to November, down from 3.8% in October (better than expected).
Underlying inflation is still above the RBA’s 2–3% target range.
Power bills were a big driver, with electricity up 19.7% over the year.

Australia's headline inflation rate has come in below economist expectations, but the reading remained outside the RBA’s target zone.

After surging to 3.8 per cent on an annual basis in October, the Australian Bureau of Statistics reported on Wednesday that the consumer price index retreated to 3.4 per cent in November.

The consensus of forecasters was for the headline figure to fall to 3.6 per cent.

Inflation still outside RBA target

But following a resurgence in inflation in the second half of 2025, the first major economic snapshot of the year won't reassure the central bank that price pressures are back under control.

The RBA places greater emphasis on the trimmed mean, which excludes volatile items to show the underlying pulse of inflation.

The trimmed mean fell from 3.3 per cent to 3.2 per cent after rising 0.3 per cent month to month, still above the RBA's 2 to 3 per cent target band.

“The undershoot on headline inflation should not be over‑interpreted," Commonwealth Bank economist Harry Ottley said. "The weaker‑than‑expected outcome largely reflected volatile items and does not appear to reflect any softening of demand in the economy,” he said.

“We maintain our view that the RBA will increase the cash rate by 25 basis points to 3.85 per cent in February.”

Headline inflation was underpinned by the timing of energy rebates rolling off in Queensland, with electricity costs up 19.7 per cent in the 12 months to November.

Australia CPI

Chart showing ABS inflation data from 2019 to January 2026. Source: AAP

New dwelling costs in focus

But the RBA will be less concerned by such temporary factors and will pay closer attention to stickier items such as new dwelling costs and market services.

New dwelling prices rose 2.8 per cent in the 12 months to November 2025, up from a 1.7 per cent rise to October 2025, although rents decelerated from 4.2 per cent to 4 per cent.

Given the ABS's monthly inflation measure is still relatively new and yet to iron out seasonal kinks, the central bank will wait until the December quarter inflation print, due out in late January, before forming a decision on rates.