National

End of energy rebates causes inflation to surge

By AAP Newswire

Sep 24, 2025

Builders — The more expensive cost of building homes is a factor as inflation edges upwards. -AAP Image

Inflation has climbed to three per cent, at the top of the Reserve Bank's target range, as higher fuel and building costs stalled Australia's progress on limiting price rises.

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Economists had expected the headline consumer price index, which was released by the Australian Bureau of Statistics on Wednesday, would rise from 2.8 per cent to 2.9 per cent for the month of August.

"The three per cent annual CPI inflation to August was up from 2.8 per cent to July, making this the highest annual inflation rate since July 2024," said ABS head of prices statistics Michelle Marquardt.

The rise in the CPI was driven by food, housing and alcohol and tobacco.

Electricity costs rose 24.6 per cent in the 12 months to August.

Ms Marquardt said that was a result of higher out-of-pocket costs for consumers as government energy rebates rolled off.

"Over the year, those rebates have been used up and those programs have finished," she said.

"Excluding the impact of the various changes in Commonwealth and state electricity rebates over the last year electricity prices rose 5.9 per cent."

The headline monthly figure had held below three per cent since August 2024, but surged from 1.9 per cent to 2.8 per cent in a surprise result last month.

While the higher headline inflation rate won't be welcomed by the central bank, it's unlikely to cause a drastic shift in its monetary policy thinking.

The annual trimmed mean, which removes volatile items, fell from 2.7 per cent to 2.6 per cent.

The RBA, in its latest economic forecasts released in August, predicted the headline figure to climb above the top of the target range by the end of the year, as government energy rebates roll off.

Underlying or trimmed mean inflation, which strips out volatile items like power prices and is included in the more reliable quarterly print, is the Reserve Bank's preferred measure.

The more reliable quarterly data shows that both headline and underlying inflation have remained within the target band for the six months to June, Treasurer Jim Chalmers said.

"The sustained progress on inflation we've made together has supported the Reserve Bank's decision to reduce interest rates three times," he said ahead of the data release.

The RBA board begins its next interest rate meeting on September 29, but analysts and markets predict it will wait until November to announce another rate cut.