Australia’s inflation rate rose to 3.8% in the 12 months to the end of December from 3.4% a month earlier, according to the Australian Bureau of Statistics (ABS).
Trimmed mean inflation, which measures the underlying increase in consumer prices, lifted to 3.3% from 3.2% over the same period, the ABS said in a media release.
The headline rate was above market expectations of 3.6% but broadly in line with forecasts of an underlying rate of 3.3%, which are in turn above the Reserve Bank of Australia’s 2–3 % target range.
ABS Head of Prices Statistics Michelle Marquardt said the largest contributor to annual inflation in December was housing, up 5.5%, followed by food and non-alcoholic beverages, up 3.4%, and recreation and culture, which rose 4.4%.
This data will be crucial in determining whether the Reserve Bank of Australia (RBA) raises interest rates at its next meeting in February, coming as it does after stronger-than-expected employment data earlier this month.
The chances of the official cash interest rate being lifted from 3.60% to 3.85% were rated at 58% yesterday by the RBA Rate Tracker, which is based on Australian Securities Exchange 30 Day Interbank Cash Rate Futures prices.
In the three months to 31 December, consumer prices rose 0.6% at the headline level and 0.9% at the underlying level.
Annual housing inflation was 5.5%, driven by electricity costs, which mostly related to state government electricity rebates in Queensland and Western Australia being used up by households.
Annual goods inflation was 3.4% in the 12 months to 31 December, up from 3.3% in the year ended November, as electricity costs rose 21.5%.
Excluding the impact of Commonwealth and state government electricity rebates over the previous year, electricity prices rose 4.6% in 2025, unchanged from the 12 months to 30 November due to annual price reviews from energy retailers in July 2025.
Annual services inflation was 4.1%, up from 3.6%, with the main contributors being domestic holiday travel and accommodation (+9.6%) and rents (+3.9%).
