Activities on Elizabeth Street (at the intersection of Bourke Street Mall) in Melbourne on a cloudy day.
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Australia’s inflation rate in the fourth quarter of 2025 was 3.6%, the highest in six quarters, reinforcing warnings from policymakers that interest rate cuts this year are likely to be limited.
The growth rate in the fourth quarter was in line with economists’ forecasts polled by Reuters and was up from 3.2% in the third quarter.
On a quarterly basis, inflation rose 0.6%, also in line with Reuters forecasts and significantly easing from 1.3% in the previous quarter.
Australia’s inflation rate rose 3.8% in December from a year earlier, beating economists’ expectations of 3.55%.
The Australian Bureau of Statistics said housing was the biggest contributor to December’s rise, with prices rising 5.5 per cent.
Prices for food, non-alcoholic beverages, recreation and culture also contributed to price increases during the month.
Shier Lee Lim, chief currency and macro strategist for Asia Pacific at foreign exchange firm Convera, said the central bank will remain “cautious” given the rise in inflation indicators.
Lim said a rate hike was unlikely at the central bank’s February policy meeting, but said further tightening could not be ruled out if inflation persisted above target over the next few quarters.
The Reserve Bank of Australia aims to keep inflation within its target range of 2-3%.
‘Too expensive’ for rate cut
The inflation figures follow recent comments from Reserve Bank of Australia Deputy Governor Andrew Hauser, who said current levels of inflation were “too high”.
“Let me be clear: any inflation above 3% is too high. We have a mandate to keep inflation between 2% and 3%, and we are currently above that,” Hauser said in an interview with ABC on January 8.
Hauser said the chances of further interest rate cuts in the short term were “probably very low.”
His comments echoed RBA Governor Michelle Bullock’s statement after the RBA’s interest rate decision on December 9 that there was no chance of a rate cut for the time being.
Australia’s economy grew by 2.1% in the third quarter, up from a revised 2% in the second quarter and the highest growth rate in nearly two years.
Block said in December that there was no need to cut interest rates at this time, citing a recovery in private sector activity and growth outpacing public demand.
