After falling through 2024 and early 2025, inflation is climbing again. The Consumer Price Index rose 4.3% in the twelve months to September 2026, up from 4.0% in August and well above the Reserve Bank's 2 to 3% target. Households are being squeezed from three directions at once: energy and fuel, housing, and interest rates.
Where prices are rising fastest
| Category (12 months to September 2026) | Change |
|---|---|
| Automotive fuel | +23.6% |
| Electricity | +12.8% |
| Council rates and charges | +5.6% |
| Housing overall | +5.2% |
| New dwellings | +4.7% |
| Rents | +3.6% |
| Food and non-alcoholic drinks | +3.2% |
| All items (CPI) | +4.3% |
Fuel is being driven by higher world oil prices. Electricity is up mostly because the Commonwealth's energy bill rebates have ended, according to the Australian Bureau of Statistics, so bills are returning to their full cost. Underlying inflation, which strips out the most volatile items, was 3.6%.
Rates are rising too
The RBA has responded by raising the cash rate five times since February 2026, from 3.60% to 4.85%. For a household with a $600,000 variable mortgage, that adds roughly $456 a month compared with a year ago, if the lender passed on every rise.
What the government has done
Treasurer Jim Chalmers' 2026 Budget and earlier decisions of the Albanese government include:
- Tax cuts: the bottom tax rate fell from 16% to 15% on 1 July 2026, worth up to $268 a year, and falls to 14% next July.
- $1,000 instant deduction: claim work expenses up to $1,000 without receipts from 2026–27.
- $250 Working Australians Tax Offset: a permanent offset for workers from 2027–28.
- Fuel excise: cut from 52.6 to 20.6 cents a litre for three months from 1 April 2026.
- Renters: back-to-back increases to Commonwealth Rent Assistance, on top of its twice-yearly indexation.
- Health: $5.9 billion for new PBS medicines and $25 billion more for public hospitals.
For a household on average earnings, this year's tax cut and instant deduction are worth a few hundred dollars. That is small next to the rise in mortgage repayments, fuel and power bills, which is why cost of living remains front of mind for so many households.
How this compares with the last inflation spike
Inflation is still well short of the 7.9% peak at the end of 2022. What is different this time is the mix. In 2022 prices rose across almost everything at once. In 2026 the pressure is narrower, concentrated in fuel, power and housing, which are hard to cut back on. That makes it feel worse for households than the headline number suggests, especially for renters and people with large mortgages.
What you can do
- Check your mortgage rate. Lenders often offer new customers less than existing ones.
- Compare energy plans. With rebates gone, the gap between the default offer and the best market offer matters more.
- Claim the instant deduction at tax time if your work expenses are under $1,000.
- Review your budget against your actual take-home pay, not your salary.
To see your take-home pay under the 2026–27 tax rates, use the pay calculator. To plan rent and moving costs, try the renter's cost planner, and to turn a weekly rent into a monthly budget figure, use the weekly to monthly rent calculator.