Australian Inflation Exceeds Expectations, Remains Above Central Bank Target Amid Service and Housing Pressures

Canberra | EcoPulse24

Australia’s inflation trajectory has again highlighted the resilience of price pressures, as the annual rate came in above market expectations, remaining above the Reserve Bank of Australia’s (RBA) target range, driven by services, housing, and energy.

Annual inflation reached 3.8% in December 2025, up from 3.4% in November and exceeding market expectations of 3.6%, staying above the RBA’s 2–3% target. On a monthly basis, the price index rose 1.0% after a flat reading in November. The trimmed mean climbed to 3.3% year-on-year from 3.2%, in line with estimates.

Service inflation hit a two-year high at 4.1%, up from 3.6% in the third quarter, propelled by holiday travel, accommodation expenses, and rising rents. Goods inflation accelerated to 3.4% from 3.3%, with electricity costs surging to 21.5% from 19.7% after some government discounts ended.

Price breakdown by category:
- Food and non-alcoholic beverages: 3.4% (vs. 3.3%)
- Alcohol and tobacco: 4.9% (vs. 4.3%)
- Clothing: 3.4% (vs. 5.1%)
- Furniture and furnishings: 2.0% (vs. 1.3%)
- Health: 3.6% (vs. 3.6%)
- Transport: 1.6% (vs. 2.7%)
- Communications: 1.1% (vs. 1.3%)
- Recreation: 4.4% (vs. 3.0%)
- Education: 5.4% (vs. 5.4%)
- Financial services: 2.5% (vs. 2.5%)

EcoPulse24 Analysis:
The latest reading confirms the broadening of price pressures, with services and housing playing a pivotal role. The persistence of core inflation above target complicates the path to monetary easing, likely prompting continued caution from policymakers until service and rent-driven pressures ease, despite some divergence among goods categories.