Highlights

  • Trimmed mean inflation has been around 3.5% for six months, Bullock said at the September 2026 media conference.
  • Trimmed mean strips out the largest price rises and falls each period before averaging the remainder to show trend inflation.
  • At 3.5%, underlying inflation is 1 percentage point above the 2.5% midpoint the RBA aims to restore.
  • The Board described inflationary pressures persisting for longer than previously expected, citing energy, demand, and global costs.

A single number has shaped the RBA's rhetoric more than any other this cycle: 3.5%. Governor Michele Bullock said at her September 2026 media conference that "the underlying inflation rate's been about 3.5 per cent for the past six months." The persistence of that reading, not just its level, is what the Board identified as the central problem.

What the Trimmed Mean Measures

The trimmed mean is an underlying inflation measure that removes the items with the largest price changes in each period before calculating the average. The aim is to see through temporary distortions, such as a sharp jump or fall in a single commodity, to reveal the underlying trend. The RBA uses it alongside other measures as an indicator of where inflation is heading.

In the September 2026 context, the trimmed mean reading of around 3.5% means that price pressure, after removing the most volatile components, has been running consistently above target for half a year. This is distinct from a single spike that might reflect a one-off event.

Where 3.5% Sits Against the Target

The RBA's inflation target is a range of 2-3%, with a stated aim of returning inflation to the 2.5% midpoint. At 3.5%, trimmed mean inflation is 1 percentage point above that midpoint and half a percentage point above the top of the target range. Bullock confirmed at the Senate on 28 October that the Board is aiming for the midpoint, not merely the top of the band.

She described recent annual inflation in her Senate statement as running "around 3.5 to 4 per cent." The gap between that range and the target midpoint is therefore at least 1 percentage point, and potentially more depending on which measure and which month is used.

Why Duration Changes the Assessment

The Board's September minutes noted: "Overall, these developments suggest that inflationary pressures will persist for longer than previously expected." The August base case had already been revised upward by the time of September. With the August upside risks having partly materialised, and oil prices a further source of pressure, the Board concluded the persistence problem was worsening.

Bullock also pointed to energy costs, AI-related investment demand, agricultural costs, and extreme weather as separate contributors to ongoing cost pressure. She told senators on 28 October that wages are not driving these pressures, but their effect on household finances is real.