Australia inflation meets expectations at 3.6%, reaching a six-quarter high
Event on Elizabeth Street (at the intersection of Bourke St Shopping Centre), Melbourne, on a cloudy day.
Charlie Rogers | An | Getty Images
Australia’s inflation hit 3.6% in the fourth quarter of 2025, the highest in six quarters, reinforcing policymakers’ warnings that interest rate cuts this year are likely to be limited.
The fourth-quarter data was in line with the expectations of economists surveyed by Reuters and was above the 3.2% seen in the third quarter.
On a three-month basis, inflation rose 0.6%, matching Reuters’ forecasts and falling sharply from the 1.3% seen in the previous quarter.
Inflation in Australia increased by 3.8% on an annual basis in December, exceeding the 3.55% expected by economists.
The Australian Bureau of Statistics said housing was the biggest contributor to December’s increase, with prices rising 5.5%.
Prices for food and non-alcoholic beverages, as well as entertainment and culture, also contributed to price increases in the month.
According to Shier Lee Lim, Asia Pacific Lead FX and Macro Strategist at foreign exchange firm Convera, the high inflation reading will lead the central bank to maintain a “cautious stance”.
While Lim said a rate hike was unlikely at the bank’s policy meeting in February, he said further tightening could not be ruled out if inflation remained stable and above target in the coming quarters.
The Reserve Bank of Australia aims to keep inflation within a target range of 2% to 3%.
‘Too high’ for interest rate cut
The inflation reading follows recent comments from Reserve Bank of Australia Deputy Governor Andrew Hauser: who said It is stated that inflation at current levels is “too high”.
“Inflation over 3%, let’s be frank, is very high. We have an obligation to keep inflation between two and three percent, and it’s above that right now,” Hauser said in an interview with ABC on Jan. 8.
Hauser said the chances of further rate cuts in the near term are “probably very low.”
His remarks echoed comments made by RBA Governor Michele Bullock, who said interest rates would be reduced following the RBA’s interest rate decision on December 9. we were not on the horizon for the foreseeable future.
The Australian economy grew 2.1% in the third quarter; It expanded from the revised 2% in the second quarter, marking the fastest growth in nearly two years.
Bullock said in December that there was no need for interest rate cuts at that time, citing the recovery in private sector activity and growth exceeding public demand.
