The ABS released its inflation figures for December 2025, which came in at 3.8 per cent over the 12 months to December.
Trimmed mean inflation was 0.9 per cent over the final quarter of the calendar year, and picked up from 3.2 per cent to 3.3 per cent over the 12 months...which was above the Reserve Bank of Australia's earlier forecasts, and above the target 2 to 3 per cent range.
Reported the ABS:
"The main reason for stronger annual Goods inflation in December was Electricity, which rose 21.5 per cent in the 12 months to December, compared to a rise of 19.7 per cent to November".
The problem with more expensive energy and power prices, as Europe is finding out, is that they have the potential to impact almost every area of the economy, driving up manufacturing and industry costs, and in turn consumer prices.
Another key factor through 2025 has been a likely re-acceleration in population growth, driving increases in rents (+3.9 per cent), and travel and accommodation prices (+9.6 per cent), as well as new dwelling prices and indeed housing costs more broadly, in the form of materials and labour prices.
Market rental prices have accelerate and increased more than this over the year, but the inflation measurement was artificially pushed lower by the Commonwealth Rent Assistance.
A high level of public spending, including for the NDIS, has helped to keep the unemployment rate very low at just 4.1 per cent, but also has driven wages and prices higher again.
The strongest rate of annual inflation was seen in Brisbane at +5.2 per cent.
Rates to rise
It's a disappointing result for the Treasury, with Australia a bit of an outlier in this regard, but there's presumably little point in the hawkish Reserve Bank waiting for further confirmation of the increase in prices, and the cash rate target will be increased at the February meeting from 3.60 per cent to 3.85 per cent.
Westpac sees this as a 'one and done' rate hiking cycle, with a cash rate target of 3.85 per cent expected to be restrictive, though realistically there is scope for another increase later in the year.
Curiously the Aussie dollar and the 3-year bond yield both dropped after the release, suggesting that markets
had been positioning for a strong inflation print, and that perhaps the figures weren't quite as bad as they might have been.
---
1. Download our property buying guide
Download our free property buying guide here.
You can also check out a few of our recent property purchases here.
Get in contact with us today if strategic property investment is your thing.
2. Subscribe to our Top 10 Podcasts for Investors
Listen in to our podcasts
The Australian Property Podcast is rapidly becoming one of Australia's biggest business podcasts, now with over 50,000 audio downloads per month, and growing fast.
And our popular Low Rates High Returns Show also remains available on Spotify.
3. Subscribe for my free daily blog
Subscribe for my free daily blog with 4½ million hits here.
You can also catch up with me daily on Twitter here, where I'm far too active daily and have over 16,000 followers.
By the way, I'm an 8-times published author on finance, investing, and business, so you can check out some of my books here.
My new book, co-authored with Cate Bakos is available to buy here or on Amazon here - check out our free Buy Right podcast series here.
4. Work with me privately
For a limited time you can book in a free diagnosis call with me here, so book in a call today.
