Why Australia’s inflation rose to 4% while underlying inflation stayed at 3.6%

Buying the same amount of fuel became much more expensive in Australia in August. Average automotive fuel prices rose 14.8%—equivalent to a hypothetical $100 purchase becoming $114.80 if its price followed that average. Meanwhile, a key gauge of broader inflation pressure held steady. ABC reported both movements.

The Australian Bureau of Statistics release on September 30 put annual Consumer Price Index inflation at 4.0%, up from July’s 3.5%. Annual trimmed mean inflation, which filters out unusually large price movements, remained at 3.6%.

Housing was the largest contributor to the annual inflation rate, ABC reported. But subtracting the ABS contribution figures reveals a different leader in the increase from July: transport.

Here is the breakdown, calculated from the ABS contribution figures for July and August. Figures are percentage points of overall annual inflation; the change column is August minus July.

The totals round to the published 3.5% and 4.0%. To reproduce transport’s share of the increase, calculate (0.6385 − 0.1841) ÷ (3.9618 − 3.4528) × 100: about 89%. Housing also added pressure, while the remaining categories collectively offset some of the rise. This describes changes in contributions to annual inflation; it does not isolate the fuel-tax effect.

The ABS attributed August’s fuel-price increase to higher world oil prices and the ending of remaining federal fuel-excise relief, as ABC reported. Excise is a tax on fuel. Government guidance dates the relief’s end to August 2, with duty rates increasing from August 3. The two explanations should stay together: the sources do not assign the entire price increase to tax.

The annual comparison also matters. July’s rate compared July 2026 with July 2025; August’s compares August with August. The July release’s historical table shows overall prices fell 0.1% in August 2025. This August’s 0.4% rise replaced that fall in the rolling comparison, helping explain why the annual rate increased by roughly half a percentage point.

The 4.0% figure therefore does not mean prices rose 4% during August. The monthly increase was 0.4%, or 0.7% after seasonal adjustment. That adjustment accounts for recurring calendar patterns, the ABS explains; it helps interpret the latest month but does not change what households paid.

The trimmed mean answers another question: how quickly are prices moving once the biggest increases and decreases are filtered out? The ABS method ranks seasonally adjusted monthly changes across 87 spending categories. It removes the highest and lowest 15% by expenditure weight, then averages the middle 70%. Those percentages refer to shares of spending, not numbers of products.

The categories removed can change each month. A separate measure always excludes fruit, vegetables and fuel, the Reserve Bank explains. The trimmed mean’s stable annual reading consequently does not imply that fuel is permanently excluded, or that prices stopped rising. Its monthly increase was 0.2%.

For households, both perspectives have limits. The CPI combines average spending patterns across eight capital cities; a frequent driver and a household without a car will feel different pressures. Regional prices may differ too. The RBA’s measurement guide also distinguishes consumer-price inflation from the spending needed to maintain a particular standard of living. An underlying measure helps assess broader pressure, while a household still has to pay its actual bills.

Interest-rate decisions bring a further timing distinction. The RBA unanimously raised its cash rate target by a quarter of a percentage point to 4.60% on September 29, before these figures were released. Its assessment cited energy costs, pressures on domestic capacity and stronger-than-expected earlier outcomes. The board said further increases would depend on developments.

After the release, ABC’s September 30 report said inflation had come in below economists’ expected 4.1%. It reported LSEG market pricing implying roughly a 20% chance of a November increase. Westpac chief economist Luci Ellis nevertheless forecast another rise unless the outlook for energy costs improved significantly. Those were dated expectations; the November decision remained open.