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# Inflation hits 4 per cent a day after another rate rise
- URL: https://www.bushletter.com/inflation-hits-4-per-cent-a-day-after-another-rate-rise/
- Published: 2026-09-30T04:58:41.000Z
- Updated: 2026-10-01T01:35:24.000Z
- Description: Fuel prices jumped 14.8 per cent in August, with the figures arriving a day after the Reserve Bank raised interest rates again.
- Author: Editor
- Tags: Finance, Australia

![Elias Thorne](https://res.cloudinary.com/dz77sb7j1/image/upload/v1774262579/bushletter/authors/elias-thorne.png)

By **Elias Thorne** · 2026-09-30

TLDR

Annual inflation accelerated to 4.0 per cent in August 2026, driven by housing costs and a 14.8 per cent monthly surge in fuel prices. The ABS figures landed the day after the Reserve Bank lifted the cash rate to 4.60 per cent, with Governor Michele Bullock warning further rises remain on the table.

## A number that arrived at the worst possible moment

The Consumer Price Index rose 4.0 per cent in the twelve months to August 2026\. This was up from 3.5 per cent in July, the Australian Bureau of Statistics confirmed on 30 September.[\[1\]](https://www.abs.gov.au/media-centre/media-releases/cpi-rose-40-year-august-2026?ref=bushletter.com) The timing was pointed. The figures landed less than twenty-four hours after the Reserve Bank Board lifted the cash rate by 25 basis points to 4.60 per cent. This was its fourth increase this year.[\[2\]](https://www.rba.gov.au/media-releases/2026/mr-26-27.html?ref=bushletter.com)

Monthly prices rose 0.4 per cent in August alone.[\[1\]](https://www.abs.gov.au/media-centre/media-releases/cpi-rose-40-year-august-2026?ref=bushletter.com) The board raised rates four times to restrain demand. Headline inflation is now widening its gap with the 2 to 3 per cent target band.

## Housing and fuel do the damage

Housing remained the largest contributor to annual inflation. It rose 5.7 per cent over the year to August. New dwelling prices were up 5.4 per cent across the same period.[\[1\]](https://www.abs.gov.au/media-centre/media-releases/cpi-rose-40-year-august-2026?ref=bushletter.com) Persistent construction cost pressures and tight rental vacancy rates continue feeding through to the index. A rate rise alone cannot quickly address this.

Transport was the second-largest contributor. It rose 5.6 per cent annually. Automotive fuel prices jumped 14.8 per cent in the month of August.[\[1\]](https://www.abs.gov.au/media-centre/media-releases/cpi-rose-40-year-august-2026?ref=bushletter.com) Treasurer Jim Chalmers pointed to geopolitical sources for the shock. He said the inflation challenge is made worse by the war in the Middle East. This is pushing up global oil prices. He said its effects are being felt directly at the petrol bowser and much more broadly right around the country.[\[3\]](https://ministers.treasury.gov.au/ministers/jim-chalmers-2022/transcripts/interview-melissa-clarke-rn-breakfast-abc-radio-0?ref=bushletter.com)

September 2026 Monetary Policy Statement media conference

## The trimmed mean tells its own story

Headline CPI captures the full force of volatile items like fuel. The trimmed mean strips those out to reveal domestic price momentum. Trimmed mean annual inflation held steady at 3.6 per cent for the third consecutive month in August. This remains well above the RBA's 2 to 3 per cent target band.[\[1\]](https://www.abs.gov.au/media-centre/media-releases/cpi-rose-40-year-august-2026?ref=bushletter.com) Three consecutive months without movement in the underlying measure is the detail the bond market reads most carefully. It suggests the disinflationary impulse has stalled.

Governor Michele Bullock left little room for interpretation after the rate decision. She said the Board will increase interest rates again if that is what is needed to get inflation down.[\[4\]](https://www.rba.gov.au/speeches/2026/mc-gov-2026-09-29.html?ref=bushletter.com) A governor who saw a clear path to the target band in the near term would have said so. Bullock did not.

Markets are now pricing further tightening into the curve. The next scheduled board meeting is the immediate focus for traders. They are watching whether September's fuel-driven spike proves temporary or embeds itself in the underlying measures. The next monthly CPI indicator is due in late October.

KEY TAKEAWAYS

01Annual CPI rose to 4.0 per cent in August, up from 3.5 per cent in July, the ABS confirmed.

02Housing was the largest inflation driver, climbing 5.7 per cent annually with new dwellings up 5.4 per cent.

03Automotive fuel prices surged 14.8 per cent in August alone, pushing transport to second-largest contributor.

04Trimmed mean inflation held at 3.6 per cent for a third consecutive month, well above the RBA's 2 to 3 per cent target.

05Governor Bullock said the board will raise rates again if required to bring inflation down.

This article contains analysis and commentary on market conditions. It does not constitute financial, investment, or professional advice. Past performance is not indicative of future results. Always consult a qualified adviser before making financial decisions.

SOURCES & CITATIONS

1. [CPI rose 4.0 per cent in the year to August 2026, ABS media release](https://www.abs.gov.au/media-centre/media-releases/cpi-rose-40-year-august-2026?ref=bushletter.com)
2. [Consumer Price Index, Australia, August 2026, ABS](https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/consumer-price-index-australia/aug-2026?ref=bushletter.com)
3. [Statement by the Reserve Bank Board, September 2026](https://www.rba.gov.au/media-releases/2026/mr-26-27.html?ref=bushletter.com)
4. [Governor Michele Bullock, Media conference, 29 September 2026](https://www.rba.gov.au/speeches/2026/mc-gov-2026-09-29.html?ref=bushletter.com)
5. [Treasurer Jim Chalmers, Interview transcript, RN Breakfast](https://ministers.treasury.gov.au/ministers/jim-chalmers-2022/transcripts/interview-melissa-clarke-rn-breakfast-abc-radio-0?ref=bushletter.com)

FREQUENTLY ASKED QUESTIONS

Why did inflation rise when the Reserve Bank has been lifting interest rates?

Rate rises work with a lag, and August's acceleration was driven partly by a 14.8 per cent monthly surge in automotive fuel prices linked to global oil markets rather than domestic demand. Housing costs, which also rose 5.7 per cent annually, are slow to respond to monetary tightening because they reflect construction costs and rental dynamics that do not ease quickly.

What is trimmed mean inflation and why does the RBA focus on it?

The trimmed mean strips out the most volatile price movements, both up and down, to show the underlying trend. The RBA watches it closely because it filters out one-off shocks like fuel spikes and gives a cleaner read on whether domestic price pressures are easing. In August, the trimmed mean held at 3.6 per cent for the third month running, suggesting underlying inflation has not yet turned.

Could the cash rate rise above 4.60 per cent?

Governor Michele Bullock said the board will raise rates again if required to bring inflation down. No specific future level has been said, and the board's next decision depends on incoming data including labour market figures and the October CPI reading.

![Elias Thorne](https://res.cloudinary.com/dz77sb7j1/image/upload/v1774262579/bushletter/authors/elias-thorne.png)

[Elias Thorne](https://bushletter.com/author/elias-thorne/?ref=bushletter.com)

Elias Thorne writes about interest rates, the bond market and the Reserve Bank. He is interested in what monetary policy actually does to household budgets, and in the long stretches of economic history that tend to repeat.