A new year and we are straight back into talk of inflation. But while the November inflation figures released on Wednesday were lower than expected, it is unlikely to do much to affect the outlook for interest rates.
One of the impacts of having more of something is that each individual piece is less valuable, and so it is with inflation stats. Last year the Bureau of Statistics moved from putting out the official consumer price index figures every quarter to every month. And while that does provide us with more information, it means that each release is given less importance than used to be the case when we had to wait three months for each one.
In November, annual inflation was 3.4%, down from 3.8% in October. This was lower than expected but not by enough to really affect the likelihood of what the RBA will do in the first week of February.
The good news is that the October figures do seem to be a bit of an outlier, with both the CPI and the trimmed mean (which strips out the biggest rises and falls to get an “underlying” figure”) falling in November:
But these new monthly figures are rather erratic. In November, prices on average did not actually change (ie any rises were cancelled by price falls). And if you wonder then why annual inflation fell, it is because in November 2024, prices rose by 0.4%, so the 0% change in price in November 2025 means the annual inflation fell:
So what has been the biggest cause of price rises over the past year?
This is where it gets a tad complicated because it really depends on where you live (and always remember CPI figures only count prices in capital cities, so if you live in Wagga Wagga, Ballarat, Cairns or any rural area, your prices are not counted).
Across the cities, Brisbane has the biggest jump. Rather than a 3.4% increase in prices, Brisbane residents saw inflation in the past year rise 5.1%, while in Perth it was just 2.8%:
What is going on?
Across the entire country the two biggest drivers of inflation were electricity prices and rents. Those two accounted for 20% of all inflation over the past year in Australia (if you ignore tobacco prices, which, given the amount of illegal cigarette sales, it’s best to do).
But that contribution was not uniform. In Brisbane, electricity prices alone accounted for a third of all inflation, while in Perth, it contributed to inflation being 25% lower than it otherwise would have been:
The reason is the timing of electricity rebates.
In Brisbane, electricity prices in November were 456% higher than they were a year earlier, while in Perth they were 29% lower. The reason was not the different sources of electricity in either state, but the timing of electricity rebates in those states starting and finishing.
Remember that annual inflation is the change in inflation from one month to that same month the year before. So if in November 2024 a state had an electricity rebate and in November 2025 it did not (or vice versa) then it looks like prices have either drastically increased or fallen. This is what happened in Brisbane and Perth:
Another concern for the Bureau of Statistics is the impact of the Black Friday sales in November. These are a relatively new thing for Australia and thus could be expected to throw a spanner into the figures. But the ABS found that mostly it was a wash – the price drops in major Black Friday categories in November last year were much the same as was the case in November 2024. This meant there was no real impact on the annual figure overall:
The figures however do make it clear January is a good one to find bargains for clothes and furniture, but not so much footwear, or accessories. And we probably should wait till March to buy appliances. Although as ever, these are averages, so don’t take this as financial or shopping advice!
Alas, while the overall level of 3.4% is less than expected, because of the erratic impacts of the electricity rebates, these figures are unlikely to produce any mortgage interest rate bargains.
The RBA will not find any reason in these figures to cut rates next month, but the lower-than-expected rate should at least prevent them increasing them. That however could all change in a few weeks, when usually we get another CPI release. That one on 28 February will cover both the month of December and the December quarter. The RBA has made it clear for the moment they will focus more on the quarterly figures, and as a result that will be the one all investors, homeowners, and federal treasurers will be looking forward to with hot anticipation.
Greg Jericho is a Guardian columnist and chief economist at The Australia Institute
