Australian inflation is expected to accelerate again in August, putting the Consumer Price Index firmly in focus just one day after the Reserve Bank of Australia lifted interest rates to a 15-year high.
The Australian Bureau of Statistics will release the August CPI figures today, with economists expecting annual headline inflation to rise to around 4.0%-4.1%, up from 3.5% in July.
A result around those levels would push inflation further above the RBA’s 2%-3% target rangeand reinforce the central bank’s concerns that price pressures are proving more persistent than anticipated.
The data arrive after the RBA on Tuesday increased the cash rate by 25 basis points to 4.60%, its fourth hike of 2026, citing elevated domestic inflation and growing pressure from higher global energy costs.
Inflation expected to turn higher
Headline CPI eased to 3.5% in July from 3.8% in June, but underlying inflation remained stubborn.
The trimmed mean measure held at 3.6%, while housing costs increased 5.0% over the year and food and non-alcoholic beverages rose 3.2%.
Westpac expects August CPI to increase about 0.4% over the month and 4.0% over the year, with higher petrol and other energy costs likely to play a significant role.
Oil prices have risen sharply amid the conflict in the Middle East, increasing costs across fuel, transport and supply chains and creating another potential source of inflation for Australian households and businesses.
That makes the underlying measures particularly important.
A sharp increase in headline CPI driven primarily by fuel could be viewed differently by the RBA from broad-based price growth across services, housing and other domestically generated components.
Another rate hike?
The August reading will provide one of the first major tests of whether Tuesday’s rate increase will be enough to contain inflation or whether the RBA could be forced to tighten policy again.
The central bank has stopped short of declaring the current hiking cycle over and has reiterated that future decisions will depend on incoming economic data.
A CPI result significantly above expectations, particularly if trimmed mean inflation also accelerates, would strengthen the case for another increase later this year.
Conversely, softer underlying inflation could give the RBA more room to pause while it assesses the cumulative effect of four rate rises delivered during 2026.
The inflation figures will also be closely watched by financial markets, where expectations for further monetary tightening have already pushed Australian government bond yields higher and weighed on rate-sensitive equities.
For households, the stakes are equally high.
Mortgage repayments have risen substantially following this year’s rate increases, while higher food, housing and energy prices continue to squeeze disposable incomes.
Today’s CPI reading will therefore help determine whether Australia’s latest rate hike marks a temporary pause point or another step in a tightening cycle that still has further to run.
