The ABS has released its Consumer Price Index (CPI) for February.
Australia’s inflation fight has hit another frustrating roadblock with new figures showing prices are still rising — and fast enough to keep pressure on interest rates.
The latest data released by the ABS today shows the Consumer Price Index (CPI) rose 3.7 per cent in the 12 months to February, down marginally from 3.8 per cent in January.
But the trimmed mean — a key measure of underlying inflation watched closely by the Reserve Bank of Australia (RBA) — held steady at 3.3 per cent, suggesting broader price pressures across the economy and cementing the case for a third interest rate hike.
Housing construction costs and rents have contributed to higher inflation in February. Photo: Chris Radburn.
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Housing remained the biggest driver of annual inflation, rising 7.2 per cent over the year — up from 6.8 per cent in January, as electricity, construction, and rental costs continued to climb.
The ABS said the stronger annual increase in February reflected the end of the federal rebates, though excluding the impact of Commonwealth and state electricity relief measures, electricity prices rose a more modest 4.9 per cent over the year, largely due to annual retailer price reviews in July 2025.
Food and non-alcoholic beverages also remained firm, rising 3.1 per cent over the year, while recreation and culture increased 4.1 per cent.
Canstar.com.au data insights director Sally Tindall said the figures showed a third cash rate hike remained firmly on the cards.
Canstar Data Insights director Sally Tindall. Picture: supplied.
“Today’s CPI figures offer little reprieve in the fight against inflation,” Ms Tindall said. “There’s no calm before the storm, but instead, persistent inflation that is set to spike once the Middle East conflict hits next month’s data, just six days out from the RBA’s next meeting.
“If the RBA ratchets up the cash rate lever for the third time in as many meetings, borrowers will be back to the highest cash rate setting since November 2011.
“This would translate into a 7.4 per cent increase in a typical borrower’s monthly repayments, on top of which will almost certainly be elevated petrol, grocery and services costs.”
Westpac economists had expected inflation to hold steady, but warned emerging energy shocks were likely to push inflation higher in the months ahead, complicating the outlook for the RBA.
They say the February data does not yet reflect the impact of the recent escalation in the Middle East, with the surge in oil prices and disruption to shipping through the Strait of Hormuz occurring too late to feed into the latest CPI print.
A petrol station sign advertises diesel for over $3 a litre, a new high due to the Middle East war, in the Melbourne suburb of Newport. Photo: William West.
Roy Morgan CEO Michele Levine said weekly inflation expectations had risen in recent weeks in the wake of the US-Israel war with Iran.
“Since mid-February average retail petrol prices have spiked to a new record high of $2.38 per litre — up by over 70 cents per litre in a few weeks,” Ms Levine said.
“Looking forward, the rapid spike in energy prices in recent weeks has led to a sharp rise in inflation expectations to record highs and threatens a significant economic slowdown in the next few months if these high prices persist.”
Master Builders NSW executive director Matthew Pollock said continued reliance on interest rate increases to counter inflation was placing more strain on housing delivery — particularly medium and high density residential projects.
“The Reserve Bank has been clear that inflation remains too high, and it has also been explicit that elevated public spending is adding to demand pressures in the economy,” Mr Pollock said. “Interest rates policy is now being forced to do the heavy lifting.”
Mr Pollock said the construction sector was “increasingly being used as the pressure valve” for inflation.
“High inflation, compounded by repeated rate rises, is eroding project feasibility across the board,” he said.
“For apartment and mixed‑use developments where funding costs, holding costs and risk profiles are already high these settings are pushing more projects into non‑viable territory.”
Households who had been banking on rate cuts later this year may now have to reset expectations, with many experts warning relief could be pushed into 2027 if inflation refuses to budge.
The RBA has made it clear it needs to see inflation firmly tracking back toward its 2–3 per cent target band before it can consider cutting rates and today’s result suggests that milestone is still some way off.
The board meets again in May.
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