Here’s a shocking truth: despite inflation cooling slightly in November, with consumer prices rising by 3.4%, it’s still stubbornly above the Reserve Bank of Australia’s (RBA) target range of 2-3%. But here’s where it gets controversial—while this dip is a welcome relief, it’s not enough to ease all concerns, especially as housing costs continue to soar. Let’s break it down.
In November, the consumer price index (CPI) climbed 3.4% year-on-year, a noticeable slowdown from October’s 3.8% rise. According to the Australian Bureau of Statistics (ABS), the trimmed mean—a key measure of underlying inflation—also dipped slightly to 3.2%, down from 3.3% in October. This moderation was more pronounced than economists had predicted, causing the Australian dollar to retreat slightly in response.
And this is the part most people miss—the RBA has been vocal about inflationary pressures in recent months, particularly after it breached the midpoint of their target band in late 2025. October’s CPI data, the first full monthly release from the ABS, had surprised on the upside, raising eyebrows across the board.
Westpac’s chief economist, Luci Ellis, a former RBA assistant governor, described November’s figures as a “very pleasant surprise” for the overall CPI. She noted, however, that much of this depends on factors like electricity prices, which saw a significant rebound as rebates phased out. “There’s a lot of noise in the data at the moment,” Dr. Ellis cautioned, highlighting the complexity of interpreting these numbers.
Housing emerged as the largest driver of annual inflation in November, surging 5.2%, followed by food and non-alcoholic beverages at 3.3%, and transport at 2.7%. Goods inflation eased to 3.3% year-on-year, down from 3.8% in October, largely due to slower electricity price increases. Electricity prices, which had spiked 37.1% in October, rose a more modest 19.7% in November.
Services inflation also softened, climbing 3.6% year-on-year compared to 3.9% in October, likely influenced by reduced travel demand post-school holidays. But here’s the kicker: the RBA’s interest rate board meets next month, and Governor Michele Bullock has hinted that the bank is weighing whether to hold or raise rates in 2026.
Economists are split on what to expect. Commonwealth Bank and NAB predict a 0.25 percentage point hike, while ANZ and Westpac believe rates will hold steady at 3.6%. Dr. Ellis remains confident rates will stay on hold, though she acknowledges the RBA’s concern about a potential resurgence in inflation. “At Westpac, we’re more optimistic about Australia’s growth prospects than the RBA seems to be,” she added.
The ABS will release December and quarterly CPI data at the end of January, providing the RBA with another critical update before their next meeting. A Reuters poll had forecast headline inflation to rise 0.3% in November, with an annual increase of 3.7%, and the trimmed mean to remain at 3.3%. November marks only the second full monthly CPI release, and Dr. Ellis warns that the trimmed mean data is still “noisy” and subject to uncertainty as the ABS refines its methodology.
Here’s the big question: With inflation still above target and housing costs skyrocketing, is the RBA’s cautious approach enough? Or should they take bolder action to rein in prices? Let us know your thoughts in the comments—this debate is far from over.
