Economists urge caution on interpreting new CPI measure
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More news: High-profile economists are urging careful interpretation of the new monthly trimmed mean measure for the consumer price index as it appears to be substantially higher than the old indicator.
AMP deputy chief economist Diana Mousina and economist My Bui said the “new monthly trimmed mean looks way different to the old indicator”. While the new monthly year-on-year trimmed mean inflation lifted to 3.3% in October from 3.2% in September, the old measure was 3% in September.
“New trimmed mean inflation looks well above the old measure which we think looks dodgy. This will create a lot of confusion as it could appear like inflation has been higher than the RBA expected, leading to questions as to whether the RBA should have cut in the first place!” Mousina and Bui said in a research note.
Differences in category measurement and new seasonal factors will mean the new measure “is going to be volatile for some time”. The AMP economists warned that this would create difficulty for the RBA as “the old measure of inflation effectively no longer exists”.
ANZ senior economist Adelaide Trimbell said the RBA will likely “cautiously” assess the new monthly CPI measure due to its “limited history which undermines the accuracy of the seasonal adjustment process, adding risk to the trimmed mean, which relies on seasonally adjusted data”.
Trimbell said the trimmed mean results will likely be revised in future monthly CPI releases although the “upward surprise” seen today will probably impact the RBA Monetary Policy board’s thinking.
Chalmers admits inflation ‘higher than we would like’
More news: Treasurer Jim Chalmers has flagged that inflation is “higher than we would like” but sought to highlight the broader decline in inflation since the Albanese government came to power in mid-2022.
He flagged that the flat CPI read in October was due to “falls in electricity and fuel prices, and a moderation in housing costs”. Chalmers highlighted that the “tick up in annual terms in part reflects temporary factors such as the timing of state energy rebates and volatile items such as travel prices”.
“When we came to office, headline inflation was 6.1 per cent and climbing – but it has now moderated substantially, which has given the RBA confidence to cut interest rates three times this year,” Chalmers said.
“Underlying inflation was hovering around five per cent but is now much lower.”
He also said: “The global economy remains uncertain and people are still doing it tough, but Australia is well placed and well prepared to confront the challenges coming at us.”
RBA in ‘trickiest spot’ as CPI accelerates to 3.8% in October
More news: An interest rate cut from the RBA has been wiped from possibility for the next few months, according to economists, as the first release of full monthly consumer inflation data found that inflation accelerated in October.
Deloitte Access Economics partner Stephen Smith said “the Reserve Bank of Australia finds itself in the trickiest spot, facing accelerating inflation and softening economic growth”.
Smith highlighted that September quarter growth data next week will “almost certainly be soft, reflecting an economy that needs more support”.
“The RBA now finds itself in the unenviable position of being caught between needing to support economic growth while getting inflation back within the 2-3% band. That tricky balancing act is a central banker’s nightmare,” Smith said.
Although the introduction of the “new and improved monthly CPI series” will reduce the potential for a “monetary policy misstep”.
IFM Investments chief economist Alex Joiner told Capital Brief that "the headline numbers were all going in the wrong direction", in part driven by "administered prices, things that aren't really driven by the market like utilities, property rates, childcare and public transport".
"The inflation that is due to market forces, is actually pretty low, it's just above 2% year on year. That's suggesting to me that it's not demand that is driving this, for the most part, it's these administered prices, and that might be something the RBA looks at and says 'well, there's not much we can do there'," Joiner said.
KPMG chief economist Brendan Rynne said “any glimmer of hope of a pre-Christmas rate cut is now all but gone”.
“Electricity prices have also jumped a whopping 37%, as many state-based rebates continued to wind down and this in addition to housing costs are putting upward pressure on prices and forcing the RBA to hold the line,” Rynne said.
State Street Investment Management APAC economist Krishna Bhimavarapu flagged that the October CPI "surprised on the upside', largely due to distortions from electricity rebate timing.
"Today’s data reinforces expectations that the RBA will maintain its extended hold. However, the sharp downside surprise in Q3 construction work done could weigh on GDP growth, introducing a counterpoint to the inflation narrative, unless residential activity is an upswing which could negate the impact of the drag from engineering work done.”
Consumer inflation rises to 3.8% in October as housing, food prices climb
The news: The consumer price index lifted 3.8% in the 12 months to October, according to the Australian Bureau of Statistics' first full monthly inflation print. This was higher than the 3.6% consensus expectation.
Trimmed mean inflation for the 12 months to October came in at 3.3%, up from 3.2% in the 12 months to September 2025.
The numbers: The consumer price index jump of 3.8% was higher than the 3.6% increase registered in the year to September, which itself was an unexpected spike. Over the month, however, the consumer price index was flat in original terms and lifted 0.3% in seasonally adjusted terms.
Annual inflation was predominantly driven by housing (+5.9%), food and non-alcoholic beverages (+3.2%) and recreation and cultures (+3.2%).
Housing costs were driven by electricity, rent and new dwelling cost increases. Electricity costs increased by 37.1% in the 12 months to October, mainly due to state government rebates being used up and the timing of Commonwealth Energy Bill Relief Fund rebates.
The context: The RBA has been warning that the Australian economy is at risk of nearing full capacity, which could potentially create inflationary pressures.
In a research note on Tuesday, Commonwealth Bank head of macroeconomics Luke Yeaman warned that the risk of hitting full capacity has meant “rate cuts will remain off the agenda”. If the economy continues to “build more steam than we expect, watch for rate hikes in 2026”.
What they said: “Today’s release marks the transition from the quarterly CPI to the complete Monthly CPI as Australia’s primary measure of headline inflation,” ABS head of price statistics Michelle Marquardt said.
“The time series for the complete Monthly CPI goes back to April 2024, which is when the ABS began collecting prices for a number of Expenditure Classes more frequently.”
The sources: ABS media release, Commonwealth Bank research, KPMG statement, Deloitte Access Economics statement, State Street statement, Treasurer Jim Chalmers media release, AMP research, ANZ research
