Inflation in Australia rose to 4.3 per cent over the year to September, the Australian Bureau of Statistics reported on Wednesday 28 October, up from 4.0 per cent in August. The measure the Reserve Bank watches most closely rose 1.0 per cent in the September quarter, above the 0.8 per cent it had assumed in August.
Most of the coverage has gone on what it means for the Reserve Bank’s decision on Melbourne Cup Day. We cover that in our RBA November 2026 preview. This article looks at the rest of the picture: where prices are actually rising, and the less obvious ways inflation reaches your mortgage, from your borrowing power to the cost of building a home.
The Headline Numbers
| Measure | September 2026 | Previous |
|---|---|---|
| Headline CPI, annual | 4.3% | 4.0% (August) |
| Headline CPI, September month | 0.8% | |
| Headline CPI, September quarter | 1.3% | |
| Trimmed mean, annual | 3.6% | 3.5% (August, revised) |
| Trimmed mean, September quarter | 1.0% | 0.8% (RBA’s August assumption) |
| Weighted median, annual | 3.4% | |
| Goods, annual | 4.6% | 4.2% (August) |
| Services, annual | 4.1% | 3.7% (August) |
The Reserve Bank’s target is inflation of 2 to 3 per cent. Headline inflation is now well above the top of that range, and so is every underlying measure.
Where Prices Are Rising
The ABS puts prices into 11 broad groups. Over the year to September:
| Group | Annual rise | What drove it |
|---|---|---|
| Transport | 8.7% | Automotive fuel, up 23.6% over the year and 9.4% in September alone |
| Housing | 5.2% | Electricity up 12.8%, new dwellings up 4.7%, rents up 3.6% |
| Education | 4.7% | |
| Recreation and culture | 4.5% | Domestic holiday travel and accommodation up 5.3% |
| Alcohol and tobacco | 4.3% | Tobacco up 8.3% |
| Insurance and financial services | 3.9% | Insurance up 5.4% |
| Health | 3.7% | Medical and hospital services up 4.8% |
| Food and non-alcoholic drinks | 3.2% | Meals out and takeaway up 3.9% |
| Communication | 2.3% | |
| Furnishings and household equipment | 0.8% | |
| Clothing and footwear | 0.4% |
Housing was the largest contributor to the annual rise, because it is the biggest share of what households spend. “Housing was the largest contributor to annual inflation in September, rising by 5.2 per cent,” said Rachael McCririck, the ABS head of price statistics. The ABS attributes the jump in electricity prices to the end of Commonwealth electricity rebates, and the rise in fuel to higher world oil prices.
Two things make this result harder for the Reserve Bank to look past. The rise is broad: AMP economists noted that about 45 per cent of the items in the CPI are rising by more than 3 per cent a year. And services inflation, which reflects local wages and costs rather than world oil prices, rose to 4.1 per cent. Services prices tend to move slowly, in both directions.
What About Newcastle and the Hunter?
The ABS does not publish a separate CPI for Newcastle. Its figures for New South Wales are measured in Sydney, where prices also rose 4.3 per cent over the year, in line with the national figure. Housing costs rose faster in Sydney, at 5.8 per cent, and transport rose 8.3 per cent.
Fuel prices tend to weigh more heavily on regional households, who drive further and have fewer public transport options. If your household runs two cars to get between Lake Macquarie, Newcastle and the Hunter Valley, the 23.6 per cent rise in fuel prices over the year is probably the price rise you feel most.
How Inflation Reaches Your Mortgage
The cash rate is the obvious channel, but it is not the only one.
1. The cash rate and your variable rate
The Reserve Bank’s job is to bring inflation back to its target, and its main tool is the cash rate, now 4.60 per cent after four rises this year. Markets now see a fifth rise, to 4.85 per cent, as likely on 3 November. If lenders pass that on in full, a typical variable rate rises from about 6.45 to 6.70 per cent, adding about $82 a month to the repayments on a $500,000 loan over 30 years. Our November preview has the figures for larger loans.
2. Your borrowing power
Inflation lowers borrowing power even if rates do not move. When you apply for a loan, lenders compare the living expenses you declare against a benchmark, the Household Expenditure Measure (HEM). The Melbourne Institute updates the HEM every quarter after the ABS releases the quarterly CPI, so as prices rise, so does the minimum spending a lender assumes for a household like yours. Lenders also read your bank statements, and bigger power, fuel and grocery bills show up there.
Higher assumed expenses leave less income to service a loan. Add the serviceability buffer, which tests your application at least 3 percentage points above the actual rate, and a rise in both expenses and rates can trim what a lender will offer by more than either would on its own. The borrowing power calculator uses HEM benchmarks and the 3 per cent buffer, and our guide to what actually increases your borrowing power covers what you can do about it.
3. Fixed rates
Fixed rates are set by what lenders expect rates to do, not by today’s cash rate. Expectations of further rises are usually priced into fixed rates before the Reserve Bank moves, so a strong inflation figure can push fixed rates up within days. If you are weighing up fixing, our guide to fixed or variable in 2026 covers break costs and split loans.
4. The cost of building
The price of new dwellings, which tracks what builders charge for a new home, rose 4.7 per cent over the year. That has eased from 5.4 per cent in August, but it still matters if you are building. A fixed-price contract signed today protects you from later rises in your builder’s costs, but variations and any items left as provisional sums do not. Construction lenders also want to see that the loan and your own funds cover the full cost, so leave room for overruns. Our construction loans page explains how progress payments work.
5. Insurance
Insurance prices rose 5.4 per cent over the year. Your lender will require building insurance on the property for the life of the loan, so this is a cost every homeowner carries. It is worth comparing your premium at each renewal rather than letting it roll over automatically.
6. Wages are not keeping up
The latest wage figures showed wages up 3.2 per cent over the year to June, while prices rose 4.3 per cent over the year to September. When prices outrun wages, the same income buys less, and that squeeze shows up in household budgets and loan assessments alike. The Reserve Bank has noted that scheduled mortgage payments are back around 10 per cent of household disposable income, near their 2024 peak.
What You Can Do Now
Check your rate. If you are paying well above what lenders offer new customers, ask your lender to reprice. It costs nothing, and a lower rate offsets some of what a rate rise would add. If they will not move, our refinancing guide explains how to tell whether a switch will pass a new lender’s test.
Build a buffer. Extra money in an offset or redraw account cuts your interest now and gives you room if rates or bills rise again.
Look at the bills that are rising fastest. Electricity and insurance are both up by more than 5 per cent over the year, and both are worth comparing. Our guide to saving for a house deposit has practical ways to cut household costs, and they help existing borrowers too.
Talk to your lender early if you are struggling. Lenders have legal hardship obligations, and options are wider before you miss a payment than after. Our page on mortgage hardship help explains your rights and where to get free local help.
What Comes Next
The Reserve Bank announces its decision at 2:30 pm AEDT on Tuesday 3 November, with updated forecasts in its Statement on Monetary Policy. In August it expected the annual trimmed mean to ease to 3.3 per cent by December, and ANZ expects those inflation forecasts to be revised up. The ABS releases the October monthly CPI on 25 November.
Frequently Asked Questions
What is the inflation rate in Australia right now?
Headline inflation was 4.3 per cent over the 12 months to September 2026, according to the ABS release on 28 October 2026, up from 4.0 per cent in August. The trimmed mean, the Reserve Bank’s preferred measure of underlying inflation, was 3.6 per cent over the year and rose 1.0 per cent in the September quarter.
What is the trimmed mean, and why does the RBA focus on it?
The trimmed mean removes the items with the largest price rises and falls in each period and averages what is left. That strips out one-off swings, such as a jump in fuel prices or the end of an electricity rebate, and gives a better read on the underlying trend. The Reserve Bank uses it to judge whether inflation is heading back to its 2 to 3 per cent target.
Does inflation affect how much I can borrow?
Yes, even if interest rates do not change. Lenders compare your declared living expenses against the Household Expenditure Measure, which the Melbourne Institute updates each quarter after the CPI is released. Higher living costs, and higher bills on your bank statements, leave less income to service a loan, so the amount a lender will offer can fall.
When is the next CPI release in Australia?
The ABS is scheduled to release the October 2026 monthly CPI on 25 November 2026. The Reserve Bank’s next decision before then is at 2:30 pm AEDT on Tuesday 3 November 2026.
Talk It Through
Rising prices affect every part of a loan, from the rate you pay to how much you can borrow. If you are buying, building or refinancing in the next few months, it is worth checking where you stand before the next rate decision rather than after. David works with borrowers across Newcastle, Lake Macquarie, the Hunter Valley and Port Stephens, and compares more than 40 lenders.
Want to know how rising prices and rates affect your loan? Call David on 0417 676 191 or get in touch via our contact form.
This article is general information only and does not take into account your objectives, financial situation or needs. Figures are current as at 28 October 2026. Inflation figures can be revised, and interest rates, lender policies and forecasts change. Please seek advice specific to your circumstances before acting.
Sources
- Australian Bureau of Statistics, CPI rose 4.3% in the year to September 2026, 28 October 2026.
- Australian Bureau of Statistics, Consumer Price Index, Australia, September 2026, 28 October 2026 (group, capital city and goods and services figures).
- Australian Bureau of Statistics, Annual wage growth of 3.2% in June quarter 2026, 19 August 2026.
- Reserve Bank of Australia, Inflation Target.
- Reserve Bank of Australia, Statement on Monetary Policy, August 2026: Outlook.
- Reserve Bank of Australia, Minutes of the Monetary Policy Meeting of the Board, 29 September 2026.
- Melbourne Institute, Household Expenditure Measure: Quarterly Updates.
- ABC News, Inflation rate rises to 4.3 per cent in September, raising rate hike expectations, 28 October 2026 (AMP and Betashares comments; RBA’s August quarterly assumption).
- ABC News, Markets live blog, 28 October 2026 (ANZ comment on RBA forecasts).
- Repayment figures are calculated on a 30-year principal and interest loan at the rates stated, with the 3 percentage point serviceability buffer in APRA’s Prudential Practice Guide APG 223.
Ready to move forward?
Have questions about anything in this article? David from Rebus Finance can help with a free, no-obligation chat.