September data will keep inflation pressure on RBA: CommBank economists

Australia’s September quarter inflation figures are expected to show little further progress in bringing underlying price pressures down, putting the Reserve Bank of Australia’s next interest rate decision firmly in focus.

Commonwealth Bank Senior Economist Trent Saunders said he expects the key trimmed mean measure of inflation - the RBA’s preferred measure, which excludes one-off spikes and outliers to measure underlying inflation - to have risen 1.0% over the September quarter, leaving the annual rate at 3.6%.

CommBank economists expect headline inflation to rise 1.3% over the quarter, and 3.9% over the year, when the Australian Bureau of Statistics releases the consumer price index (CPI) figures on Wednesday, less than a week before the RBA’s next monetary policy decision on Melbourne Cup Day, 3 November.

If the forecast is right, it would mark a fifth consecutive quarter in which trimmed mean inflation has risen by between 0.8% and 1.0%.

The result would also be stronger than the RBA’s August forecast for a 0.8% quarterly rise in trimmed mean inflation, although Saunders said the strength already seen in July and August means a 1.0% result is unlikely to surprise the RBA’s Board.

That follows August inflation data showing headline inflation had risen to 4% while underlying inflation remained at 3.6%.

Another rate rise remains a risk

“While our baseline remains for the RBA to leave the cash rate unchanged, the decision will depend heavily on the outcome and composition of next week’s CPI print,” Saunders said.

The RBA has already increased the cash rate four times this year, most recently lifting it by 25 basis points to 4.60% in September. The September rate rise followed stronger inflation and mounting concerns about domestic price pressures.

But Saunders said the meeting remained “live” and the decision would depend heavily on both the headline CPI result and what was driving it.

Uncertainty increased after RBA Deputy Governor Andrew Hauser said this week the inflation outlook looked “materially worse” than the RBA had projected in August.

CBA’s Market Strategy and Rates Research team said Hauser’s comments caused a sharp repricing in interest rate markets, with market-implied expectations of a November increase jumping from about 24% to 56%.

The RBA is balancing those inflation concerns against signs of softer economic activity, including weaker labour market conditions and subdued consumption growth.

Saunders said an important question for the RBA Board will be whether the CPI shows price pressures becoming more broad-based or persistent, particularly in services.

Fuel expected to push headline inflation higher

Petrol prices are expected to make another large contribution to inflation in the September data.

CBA forecasts fuel prices rose 9.8% in September after a 14.8% increase in August, taking annual fuel inflation to about 24%.

Fuel alone is expected to add around 0.3 percentage points to the monthly headline CPI increase.

CBA forecasts annual headline inflation rose from 4.0% in August to 4.2% in September.

Services are another area the RBA will be watching closely. CBA expects annual market services inflation to rise from 4.1% to 4.3%, suggesting domestic price pressures remain firm.

What’s happening with housing costs?

There are some signs inflation in new housing costs is starting to ease. CPI data does not include mortgage interest repayments, but does track other housing costs including rents, new dwelling construction, utilities, council rates, and property repairs.

CBA expects new dwelling prices to have risen 0.2% in September, with annual inflation slowing from 5.4% to 4.9%.

Construction costs pushed new home prices higher earlier this year, but weaker demand for new homes and softer conditions in the established property market are expected to increasingly limit builders’ ability to pass higher costs on to buyers.

Rent pressures remain firm, with annual rent inflation forecast at around 3.5%. CBA said low vacancy rates and tight rental conditions continue to support rental growth.

Property rates and charges are also forecast to have risen 4.3% in September.

The housing slowdown is one of several signs that higher interest rates are feeding through the economy. RBA Assistant Governor Christopher Kent told Commonwealth Bank’s Global Markets Conference this week that interest rate changes do take time to work through the economy, and that changes to monetary policy made so far in 2026 were broadly working as the RBA expected.

Where does inflation go from here?

“We expect underlying inflation to improve beyond the September quarter, but only gradually, with a risk that progress may be too slow for the RBA,” Saunders said.

Softer household demand, a weaker labour market and slower housing activity should increasingly make it harder for businesses to pass higher costs through to consumers.

But persistent services inflation and higher input costs, including fuel, could slow that improvement.