Key Highlights

  • Electricity prices rose 12.8 per cent over the year to September, mainly because Commonwealth electricity rebates ended.
  • Rents rose 3.6 per cent over the year and new dwellings 4.7 per cent, within a headline rate of 4.3 per cent.
  • The trimmed mean at 3.6 per cent is less affected by one-off shifts but still sits above the 2–3 per cent target.

The end of Commonwealth electricity rebates pushed measured power prices sharply higher in the year to September, adding to an inflation reading the Reserve Bank will consider on 3 November.

Electricity prices in the Consumer Price Index rose 12.8 per cent over the 12 months to September 2026, according to the Australian Bureau of Statistics. The reason, the ABS said, was mainly the end of Commonwealth electricity rebates.

It is a reminder that the CPI measures what households actually pay. When a government rebate lowers a bill, measured prices fall; when the rebate ends, measured prices rise, even if the underlying cost of generating and delivering power has not changed in the same way. In September, that mechanism contributed to a jump in annual headline inflation to 4.3 per cent, up from 4.0 per cent in August.

How rebates affect the CPI

The CPI tracks the out-of-pocket cost of a fixed basket of goods and services. Electricity rebates paid by government reduce the amount households pay for power, so while they are in place, the measured electricity price is lower than it would otherwise be.

When the rebates end, that discount disappears from the measured price. The result in the data is a step up in electricity inflation, which is what the ABS reported for the year to September.

This is an important distinction for interpreting the figures. A rise driven by the removal of a rebate is a different phenomenon from a rise driven by, for example, higher wholesale energy costs. Both, however, show up in what households pay and in the headline inflation rate.

Electricity within the bigger picture

Electricity sits within the Housing group of the CPI, which rose 5.2 per cent over the year. Other housing components moved more modestly:

  • Rents: up 3.6 per cent over the year, and 0.2 per cent in September.
  • New dwellings: up 4.7 per cent over the year, unchanged in September.
  • Electricity: up 12.8 per cent over the year.

Across the full basket, goods prices rose 4.6 per cent and services prices 4.1 per cent. The other major contributor to the September jump was automotive fuel, which rose 23.6 per cent over the year, driven by higher world oil prices.

The underlying measure, the trimmed mean, rose 3.6 per cent over the year, up from a revised 3.5 per cent in August. Because it removes the largest price changes in each period, it is less affected by one-off shifts like the end of a rebate. CPI excluding volatile items, which strips out fruit and vegetables and automotive fuel, was 3.7 per cent.

Energy and the RBA's changing outlook

Electricity is one part of a broader energy story the RBA has been watching closely. In its 29 September statement, the Monetary Policy Board said "global energy prices are now much higher than had been assumed in the August forecasts." Governor Michele Bullock repeated the point to the Senate Economics Legislation Committee on 28 October, adding: "Inflation will therefore likely be higher than was our base case in August."

The Governor linked global cost pressures to the Middle East conflict, which she said has re-escalated, as well as AI-related demand and extreme weather. Business investment, she told senators, has picked up, mainly in data centres and renewable energy.

Those factors are distinct from the rebate effect in the September CPI. But together they show why energy costs feature so prominently in the RBA's current assessment of inflation risks.

Why one-off effects still matter to the Board

It might seem that a rebate ending is a technical quirk the RBA could simply look past. In part, it can: the Board pays close attention to underlying measures precisely because they are less distorted by such effects.

But a rise in measured prices still affects household budgets and, potentially, expectations. The Governor told senators that short-term inflation expectations are elevated. At her 29 September media conference, she said: "It's critical that we stop expectations for high inflation from becoming embedded in price-setting decisions".

She also spoke about the cost to households: "Pay packets don't go as far as they used to, and that's why we need to stop this high inflation." And in her Senate statement: "High inflation hurts everyone."

The broader inflation trend gives the Board little room for comfort. The Governor noted that headline inflation peaked at 7.9 per cent at the end of 2022, was within the 2–3 per cent target range for a period in 2024 and 2025, then picked up in the second half of 2025 and has been above target since.

The cash rate target stands at 4.60 per cent after four increases this year totalling 100 basis points. The Board's September statement said it would be "attentive to the data and the evolving assessment of the outlook and risks", including "increasing the cash rate target further if needed".

Assistant Governor (Economic) Sarah Hunter, speaking on 60 Minutes before the CPI release, said "We don't want to live with high inflation for a long time." She declined to signal the next decision.

The Board meets on 2–3 November. Its decision, along with a new Statement on Monetary Policy containing updated forecasts, will be published at 2.30 pm (AEDT) on 3 November, followed by a media conference at 3.30 pm. The outcome has not been decided.

The bottom line

Electricity prices rose 12.8 per cent over the year to September, mainly because Commonwealth electricity rebates ended, helping lift headline inflation to 4.3 per cent. The underlying trimmed mean, at 3.6 per cent, is less affected by such one-off shifts but still sits above the 2–3 per cent target. Households may find it worth knowing the difference: a rebate ending raises what they pay without necessarily reflecting a change in underlying energy costs. For the RBA, both measures feed into an inflation picture that the Governor says is likely to be higher than its August base case.