activity on Elizabeth Street (at the intersection of Bourke St Mall), Melbourne on a cloudy day.
Charlie Rogers | Moment | Getty Images
Australia’s inflation rate climbed to 3.6% in the fourth quarter of 2025, the highest level in six quarters, signaling that anticipated interest rate cuts this year may be delayed. the news casts a shadow over hopes for easing financial pressures for Australian households.
The latest figures, released by the australian Bureau of Statistics, aligned with economists’ forecasts from Reuters, representing an increase from the 3.2% recorded in the third quarter.
Quarterly inflation rose 0.6%, also matching Reuters’ predictions, but marked a significant slowdown from the 1.3% increase seen in the previous quarter.
In december alone, Australia’s inflation rose 3.8% year-on-year, exceeding the 3.55% economists had projected.
Housing costs were identified as the primary driver of the December increase, with prices surging 5.5%.
Rising prices for food and non-alcoholic beverages, alongside recreation and cultural activities, also contributed to the overall price increases for the month.
Shier Lee Lim, Lead FX & Macro Strategist for Asia Pacific at Convera, believes this higher inflation reading will compel the central bank to adopt a “cautious stance.”
While a rate hike at the February policy meeting is considered unlikely, Lim cautioned that further tightening of monetary policy cannot be ruled out if inflation persists above the target range in the coming quarters.
The Reserve Bank of Australia (RBA) aims to maintain inflation within a target range of 2% to 3%.
‘Too High’ to Cut Rates
the inflation data follows recent statements from Reserve Bank of Australia Deputy Governor Andrew Hauser, who asserted that current inflation levels are “too high.”
“inflation above 3%,let’s be clear,is too high. We’re charged to keep inflation between two to three per cent and it’s currently above that,” Hauser stated in an interview with ABC on Jan. 8.
Hauser indicated that the probability of near-term interest rate cuts was “probably very low.”
These comments mirrored those of RBA Governor Michele Bullock following the RBA’s rate decision on Dec. 9, when she stated that interest rate cuts were not imminent.
Australia’s economy expanded by 2.1% in the third quarter,accelerating from a revised 2% in the second quarter and marking its strongest growth in approximately two years.
In December, Bullock explained that rate cuts were not necessary at that time, citing a resurgence in private-sector activity and economic growth outpacing public demand.
