Why did inflation rise so sharply in Australia in Q3 2025?

Headline inflation rose by 1.3% in the quarter, driven by a 24% surge in electricity prices and higher travel and services costs. Underlying inflation also accelerated, pulling the trimmed mean reading to 3.0% annually. That reversal from earlier easing prompted concerns the inflation fight isn’t over.

Does this mean the RBA will raise rates instead of cutting?

Yes, while not guaranteed, the probability of a further rate cut in 2025 is near zero (about 8% for November), and the RBA is even signalling rate hikes remain on the table if inflation stays high.

How should investors adjust their portfolios in light of rising inflation?

Investors should favour sectors resilient to inflation (like commodities, infrastructure, and financials) and reduce exposure to long-duration, growth-oriented stocks that rely on low interest rates. Diversification and inflation hedging become more important.

Does this inflation surge affect the property market?

Yes. Higher inflation and higher interest rates typically dampen housing affordability and borrowing capacity. With the cash rate unlikely to fall soon, mortgage costs are likely to stay elevated, reducing demand and potentially putting downward pressure on valuations.

Global Market Insights

Inflation Surge Wipes Out Chances of November Rate Cut, RBA May Hike Instead

ByAyesha Sadeeqa October 29, 2025October 29, 2025

Inflation in Australia has surged to 3.2% for the year to September 2025, far above the Reserve Bank of Australia’s (RBA) target band of 2%–3%. This sharp uptick is concentrated in sectors such as electricity (+24% year-on-year) and groceries (+3.1%). For investors following monetary policy-sensitive markets, this jump in inflation is the key reason the RBA’s chance of a November rate cut has collapsed; market pricing now puts it at only about 8%. Looking ahead, the central bank may even consider a rate hike if inflation proves persistent. The takeaway: inflation is back on the radar, and that shifts the interest-rate outlook, which has direct implications for equities, fixed income, and real estate.