Highlights

  • Annual CPI rose to 4.3% in the year to September, with housing the largest contributor at 5.2%, the ABS reported.
  • Markets lifted the odds of a November rate rise from about 60% to about 79%, later nearing 90%.
  • Higher rents raise taxable income, while insurance, rates, repairs and loan interest are generally deductible for properties available for rent.
  • New dwelling prices are rising 4.7% a year, just as negative gearing narrows to new builds from 1 July 2027.

Automotive fuel jumped 23.6% over the year to September, yet it was housing, up 5.2%, that the Australian Bureau of Statistics named the biggest contributor to a 4.3% inflation rate. For investors the number reaches well beyond the checkout. It frames the Reserve Bank's decision on Tuesday 3 November, it flows into the rents and costs reported on rental tax returns, and it lands eight months before the negative gearing and CGT changes begin on 1 July 2027.

What the ABS reported

Annual CPI climbed from 4.0% in August to 4.3% in September, and prices rose 1.3% over the quarter. The trimmed mean, the RBA's preferred underlying gauge, was 3.6% for the year. "Housing was the largest contributor to annual inflation in September, rising by 5.2 per cent," said Rachael McCririck of the ABS.

New dwelling prices rose 4.7% as builders passed on materials and labour costs, electricity jumped 12.8% largely because Commonwealth rebates ended, and rents rose 3.6%. Transport rose faster than housing, up 8.7%, and fuel sits outside the trimmed mean, which helps explain the gap to the headline.

Treasurer Jim Chalmers said, "The numbers in today's data are still too high,", promising more savings in the mid-year budget update.

Rate rise odds climb

Markets priced a November hike at about 60% before the release and about 79% soon after, with a later headline putting the odds "near 90pc". ANZ said the data "cements the case" for 0.25 percentage points. CBA switched from a hold to a hike, calling it "an insurance hike", and UBS expects the cash rate to reach 4.85%. Westpac's Luci Ellis expects a hike but not a run of them. The RBA board meets on Monday 2 November and announces on Tuesday 3 November, and these remain forecasts.

What it means at tax time

Rental income is assessable, so a rent rise lifts taxable income even as it improves cash flow. Insurance, council rates, repairs and, where the landlord pays them, utilities are generally deductible for a property genuinely available for rent, and the ABS reported insurance up 5.4%. Loan interest is generally deductible too, so a rate rise lifts deductions but also the after-tax cost of holding the property.

A rent rise, worked through

Hypothetical: a tenant pays $600 a week and rent rises 3.6%, matching the ABS annual figure. That is $21.60 a week, or $1,123.20 a year. With other income of about $100,000, the marginal rate is 30% plus the 2% Medicare levy, so extra tax is about $359.42, leaving roughly $763.78. If interest or other costs also climb, that gain could vanish. The example ignores vacancy and agent fees.

New builds and softer prices

From 1 July 2027, enacted law confines negative gearing to new builds, and investors who already held a property at the 7:30pm AEST cut-off on 12 May 2026 are protected. Buyers who still want to negatively gear are steered towards the segment where prices are rising 4.7% a year. The same laws swap the 50% CGT discount for indexation plus a 30% minimum tax on gains accruing after 1 July 2027, so September's inflation would not count.

Meanwhile, Cotality shows national values down 1.1% in September, a sixth straight monthly fall, and 5.2% below the March 2026 peak. Total listings reached 145,573, up 19.1%, while new listings fell 7.9% to 36,440. Rising building costs, falling established values and possibly higher rates make the outlook harder to read than usual.

What to watch

The RBA board meets on Monday 2 November, the day Cotality's October index is due, and announces its decision on Tuesday 3 November. The mid-year budget update follows.