Australia’s annual inflation rose to 3.8% in the year to October (up from 3.6% in September). This is the first “complete” Monthly CPI release from the ABS, which now provides a fuller picture each month.

The biggest drivers were housing (+5.9%), food & non‑alcoholic beverages (+3.2%), and recreation & culture (+3.2%). Within housing, electricity costs rose 37.1% year‑on‑year, partly reflecting the unwinding/timing of state and Commonwealth rebates. Trimmed‑mean (underlying) inflation edged up to 3.3%.

Why has inflation increased?

  • Utilities and rents remain key pressure points, with rebates rolling off and demand for housing staying firm.
  • This October release also marks a methodological shift to complete monthly CPI, so we get faster reads, but monthly data can be more volatile than quarterly figures.

What could this mean for interest rates?

The Reserve Bank of Australia (RBA) kept the cash rate at 3.60% in November and has signalled caution about easing further while inflation is still above the 2–3% target band. Recent analysis suggests near‑term rate cuts are less likely, and a hold is the more plausible near‑term path, with some risk that rates could rise if inflation proves stubborn.

What investors might expect if rates rise (or stay higher for longer)

  • Shares (equities): Expect more day‑to‑day volatility. Interest‑sensitive areas (e.g., property/REITs and some growth stocks) can feel more pressure when discount rates rise, while financials and resource names may be more resilient depending on broader conditions.
  • Fixed income (bond funds): When rates rise, bond prices typically fall, more so for long‑duration bonds. However, yields—the income you earn—increase, and shorter‑duration or floating‑rate exposures can help reduce sensitivity to rate moves. Over time, high‑quality bonds still play a defensive role and provide income.
  • Diversified portfolios: A balanced mix of shares and bonds is designed to smooth the ride. Short‑term moves can be uncomfortable, but diversification and disciplined rebalancing help keep portfolios aligned to long‑term goals. (General principle supported by major managers’ research.)

The bottom line

The latest data keeps inflation above target and reduces the odds of imminent rate cuts. This doesn’t call for alarm—but it does reinforce the value of diversification, quality, and time in the market over trying to time near‑term rate moves.

If you’re concerned or have questions, our advisers at BKM Wealth are here to help. Whether it’s reviewing your asset mix, bond fund duration, or your broader plan for the next 12–24 months.

General information only. It doesn’t take into account your objectives, financial situation or needs. Rikki Juzwin is an Authorised Representative (ARN 1235156) of Viridian Advisory Pty Ltd (ABN 34 605 438 042, AFSL 476223

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