Why did Australian CPI rise to 3.8% in December?

The increase reflects sticky services costs and firm housing components, with slower relief from goods disinflation. Rents, insurance, and health costs remained elevated, lifting the basket. Seasonal discounting also looked softer than usual. Together, these factors kept the inflation pulse strong and extended the timeline to return to the RBA’s 2% to 3% target.

How does this change RBA rate hike odds?

A hotter CPI and underlying inflation at about 3.4% raise the chance of another hike. The Board will weigh services stickiness and inflation expectations against growth and jobs. If it sees risks of a stall in disinflation, it may tighten or signal a stronger bias, keeping near‑term market pricing elevated.

What should Australian investors watch in markets now?

Keep an eye on 2‑ to 3‑year ACGB yields, rate‑sensitive ASX sectors like REITs and consumer discretionary, and AUD crosses. Guidance language from the RBA will also matter for direction. These indicators show how traders interpret the inflation path and any shift in policy expectations over the next few meetings.

How can I position a portfolio if the inflation rate Australia stays high?

Prefer quality companies with pricing power and strong cash generation, diversify bond duration, and consider some inflation‑linked exposure. Review cash and term deposit ladders to capture higher rates. For borrowers, build buffers using offset accounts and faster repayments. Reassess currency hedges if a hawkish RBA supports AUD versus peers.

Global Market Insights

Australia CPI January 28: Hot print puts RBA hike back on table

ByDanny Kontos January 28, 2026January 28, 2026

The inflation rate Australia matters for every mortgage holder and investor. December CPI rose 3.8% year over year, while underlying inflation held near 3.4%. That hot pulse has pushed RBA rate hike odds higher ahead of next week’s meeting. Markets are watching bond yields, the Australian dollar, and rate‑sensitive shares. We outline what drove the spike, how the RBA may respond, and the practical steps to protect portfolios while policymakers aim for a soft landing.