By Ame Muller
Headline inflation edged up to 4.4% year-on-year (y/y) in August from 4.3% in July, coming in slightly below our forecast and market consensus of 4.5%. There was no monthly pressure.
Core inflation eased marginally to 4.1% y/y, also showing no monthly pressure. Services inflation recorded 0.1% month-on-month (m/m) and 5.1% y/y, while core goods inflation was -0.2% m/m and 1.6% y/y.
Average fuel prices declined by 1.3% m/m but were 20.0% higher than in August 2025.
Food and NAB inflation picked up to 1.1% y/y, from 0.9% previously, while monthly pressure was 0.1%, driven mainly by higher meat prices.
Outlook
Updating our model with the latest data suggests that headline inflation will rise to 4.7% y/y and 0.5% m/m in September, with higher fuel prices remaining the primary source of monthly pressure. Some additional core inflation pressures are expected as new housing inflation data becomes available and public transport prices are surveyed. However, food inflation continues to provide an important offset, with near-term food price pressures remaining relatively contained.
Looking ahead, the inflation outlook has become more challenging as oil prices have risen sharply amid renewed geopolitical tensions. At the same time, the latest Bureau for Economic Research (BER) Survey of Inflation Expectations for 3Q26 showed a modest improvement in inflation expectations. Professional respondents left their 2026 headline inflation forecast unchanged at 4.4%, while expectations for 2027 and beyond edged lower. Household inflation expectations also declined sharply, reversing the previous quarter's increase. Overall, the survey suggests that inflation expectations remain reasonably well anchored despite heightened geopolitical and energy-related risks.
The September inflation print is scheduled for release on 21 October. Major periodical surveys conducted in September include housing (15.53% weight in CPI), passenger transport services (2.51%) as well as domestic services (1.52%).
