Inflation up to 3.8% as price pressures rise and hopes for Reserve Bank interest rate cuts fall

Inflation has climbed to 3.8% in the year to October, from 3.6% the month before, as Jim Chalmers flagged he could announce further energy bill subsidies for households in the upcoming midyear budget. Electricity prices were 37% higher in the year to October, which the head of the Australian Bureau of Statistics, David Gruen, said reflected a “huge valley” in electricity prices this time last year when state governments’ household energy subsidies were at their peak. Still, the ABS’s first complete monthly consumer price index confirmed a sharp upswing in price pressures since June that has devastated hopes for more Reserve Bank interest rate cuts, and even raised the potential the next move could be up. Sign up: AU Breaking News email Underlying inflation, which removes the impact of large, temporary price swings like in electricity prices, lifted from 3.2% in September to 3.3% in the year to October. Cherelle Murphy, EY’s chief economist, said there was no chance of a rate cut before Christmas, and the RBA monetary policy board may even begin contemplating having to hike. “If the re-acceleration in inflation is sustained over coming months, interest rate hikes are more likely than cuts in 2026,” Murphy said. Interactive Inflation is now at its highest since mid-2024, and has performed a major U-turn after it dropped as low as 1.9% in June – again, as energy bill rebates clouded the underlying picture. Gruen told Guardian Australia that the year-on-year increase in power costs had peaked in October, which suggested inflation could ease through the rest of this year and into the next. “In year-ended terms, this is the biggest increase” in the electricity index, he said. Interactive But with cost of living still the number one issue facing voters, Chalmers left the door open for household energy bill rebates to be extended beyond the end of this year, saying the government would come to a decision in “the next few weeks”. The treasurer said there would be no major policy announcements in the midyear budget due around 17 December. Despite the Coalition using parliamentary question time to hammer the government on energy prices, Chalmers said “we’ve been very clear and very upfront for some time now – this electricity bill relief is really important”. “It is taking some of the edge off power prices for families and pensioners and people in our communities right around Australia.” He repeated his mantra that energy rebates “won’t be a permanent feature of the budget” but left the door open to extending the measures beyond December. “We’ll take a decision about that in the next few weeks.” The March budget extended the commonwealth’s energy bill relief fund for six months, which gave another $150 to all households and about 1 million small businesses, split into two quarterly instalments. The opposition leader, Sussan Ley, repeatedly dodged questions in a Wednesday morning interview over whether the Coalition supported extending the power bill subsidies.