Highlights

  • Annual CPI inflation rose to 4.3% in the year to September, with trimmed mean inflation at 3.6%.
  • Chalmers says private demand outweighs public demand four to one and promises more savings in MYEFO.
  • Market pricing for a November rate rise climbed from about 60% before the data to about 79%.
  • Legislated tax cuts save a $60,000 earner about $268 a year per step, roughly $5 a week.

If you carry a mortgage, the argument over who is to blame for 4.3% inflation is no longer abstract. Treasurer Jim Chalmers told reporters on 28 October that "for every $5 of demand in our economy, four is private and one is public", and he promised more budget savings in the Mid-Year Economic and Fiscal Outlook (MYEFO). Markets read the same data differently, pricing a Reserve Bank rate rise at next week's meeting. Here is what each side is saying, and what it could mean for your household budget.

Inflation at 4.3%

The Australian Bureau of Statistics reported annual CPI inflation of 4.3% in the year to September, up from 4.0% in August, with prices up 1.3% over the September quarter. The trimmed mean, a measure of underlying inflation, was 3.6% annually, with August revised down to 3.5%. Housing at 5.2% and transport at 8.7% were named among the biggest contributors, with fuel up 23.6%, electricity up 12.8% and insurance up 5.4%.

What Chalmers said

In his official response, Chalmers said: "The numbers in today's data are still too high." He also argued that budgets "aren't the primary driver of prices in the economy". The government has found "almost $180 billion in savings" since taking office, he said, including more than $60 billion in this year's Budget, with further savings coming in MYEFO. He also cited further income tax cuts as cost-of-living relief and pointed to oil: Brent crude futures averaged US$107 a barrel in October, against about US$70 before the Middle East conflict.

He also cited further income tax cuts as cost-of-living relief and pointed to oil, saying Brent crude futures averaged US$107 a barrel in October, compared with about US$70 before the Middle East conflict. The "four is private and one is public" line came at his press conference.

Is public demand really one in five?

On the Treasurer's framing, public demand is roughly 20% of the total, which the government uses to argue that budget policy cannot be the main source of inflation. Treasury Secretary Jenny Wilkinson made a similar case at Senate Estimates the same day, pointing to global events and private investment, including AI and data-centre spending. She reportedly said real government spending grew 1.3% in the latest year, against a median of 2.9% this century.

The Opposition disagrees. Liberal Senator Jane Hume argued that spending is high by historical standards, and when asked whether the government had spent more than it saved, Wilkinson said Treasury had no cumulative figure.

What the tax cuts are worth

Chalmers did not detail new tax measures, but legislated changes give a guide. The lowest marginal rate fell from 16% to 15% on 1 July 2026 and is scheduled to drop to 14% from 1 July 2027. It applies to income between $18,201 and $45,000.

The rate rise risk

Pricing for a November rate rise was about 60% before the data. Overnight index swaps showed about 79% by 11:47am, and an ABC headline later put the odds "near 90pc". ANZ sees the data as settling the case for a 25 basis point rise, CBA switched from a hold to a hike it called "an insurance hike", and UBS expects a rise to 4.85%. Westpac's Luci Ellis also expects a rise but said further hikes are not the base case.

For a hypothetical $600,000 mortgage, a 0.25 percentage point rise adds about $1,500 a year in interest, or roughly $125 a month, on a simple interest-only basis. These are bank forecasts and market pricing only; the RBA board meets on Monday 2 November and announces on Tuesday 3 November.