Inflation Runs Hotter Than the RBA Expected, Putting a November Hike in Play

Today's inflation figures were the last big piece of data the RBA will see before it meets on 3 November, and they didn't make its job any easier. Underlying inflation, the measure the RBA watches most closely, rose 1.0% over the September quarter. The RBA had expected 0.8%. It's the fastest rise this year, and it lands right on the line ANZ and Westpac drew for a fifth rate hike, to 4.85%.

The Numbers

The ABS released the figures at 11:30am AEDT today. These are the three that matter:

What Is Underlying Inflation, and Why Does It Matter?

Headline inflation counts every price change, including big one-off jumps. Underlying inflation (known as the "trimmed mean") leaves out the most extreme price moves each quarter, so it shows the real trend. It's the number the RBA watches most when it decides whether rates need to go up.

Before today, the test was simple. If underlying inflation came in close to the RBA's 0.8% forecast, the RBA had room to hold rates. If it came in well above, ANZ said a November hike was "more likely than not".

It came in at 1.0%, after 0.8% in each of the previous two quarters. In other words, price rises are speeding up again, not slowing down.

Why are prices overall up 4.3%? Mostly fuel and power. Petrol is up 23.6% over the year because of higher world oil prices, and electricity is up 12.8% since government energy rebates ended. But it isn't only energy. Eating out, takeaway, new homes and rents are all still getting more expensive.

Markets Now Expect a Hike

When we previewed the November meeting on 11 October, markets saw only about a 20% chance of a hike. That changed after RBA Deputy Governor Andrew Hauser warned that the inflation outlook looked "materially worse" than the RBA had expected. By the eve of today's release, the odds were above 50%.

Today's figures pushed them higher again. Shortly after the release, market pricing showed about a 79% chance of a November hike. Westpac's chief economist, Luci Ellis, said today's data backed the bank's call for a hike in November, though she doesn't expect more rises after that. The odds can still shift before 3 November, but today's result gives the RBA no new reason to hold off.

Where the Banks Stand

Jobs: The Main Reason to Hold

The RBA also has to think about jobs, and that's the strongest argument for holding rates. Unemployment rose to 4.7% in September, up from 4.6%, and the number of people in work fell by 39,300.

The next jobs figures aren't out until 19 November, after the decision. So when the RBA meets, it will be weighing today's hot inflation figures against September's weaker jobs numbers.

What It Means for Your Mortgage

The RBA announces its decision at 2:30pm AEDT on Tuesday 3 November. It will also publish its updated forecasts for inflation and the economy that day.

If the RBA hikes to 4.85% and lenders pass it on in full, here's the likely impact on a typical variable-rate loan:

If the RBA holds at 4.60%, repayments stay where they are for now. But with inflation still well above the 2–3% target, a hold in November wouldn't rule out a move in December or early 2027.

What Should Borrowers Do Now?

Stress-test your budget against 4.85% this week. With underlying inflation running above the RBA's forecast, a fifth hike on 3 November could well happen. On a $600,000 loan that would add roughly $99 a month. Check whether your budget can absorb that now, rather than after the decision.

Check your rate against what new customers are offered. Existing borrowers often pay 0.5%–1.0% more than the rates lenders advertise to new customers. That gap is there whatever the Board decides on 3 November, and a refinance or a repricing request can more than offset a 0.25% rise.

If you're weighing up a fixed rate, compare carefully. Fixed rates price in expected hikes ahead of time, so after today's data some lenders may reprice their fixed offers before the RBA meets. Compare the fixed rate on offer against your variable rate after one or two more hikes, not just today's variable rate.

This article contains general information only and does not take into account your personal financial situation, needs or objectives. Consider your own circumstances and seek independent advice — including from us — before acting on anything here.

The bank forecasts, economist commentary and market-implied probabilities in this article are third-party estimates, not a guaranteed outcome — the RBA Board can and does decide differently from what markets and economists expect.

Sources: ABS, Consumer Price Index Australia, September 2026; CommBank, September Data Will Keep Inflation Pressure on RBA; CommBank, Economists Stick With November RBA Interest Rates Call; Aussie, What Experts Predict for the RBA's November 2026 Decision; ABS, Labour Force Australia, September 2026; ABC News, Markets Live Updates: ASX Gives Back Some Gains as Inflation Comes in Hot; investingLive, Australia CPI Preview: Banks See 1.0% Core Rise, Above the RBA's 0.8% Forecast.