Key Highlights

  • CPI excluding volatile items, meaning fruit and vegetables and automotive fuel, was 3.7 per cent annually.
  • Headline CPI was 4.3 per cent and the trimmed mean 3.6 per cent, so all three gauges sit above the 2–3 per cent target.
  • Electricity, housing costs, services and a range of goods are still adding to price growth.

Remove the two most erratic items from the September 2026 Consumer Price Index and annual inflation still sits well above the Reserve Bank of Australia's 2–3 per cent target.

Petrol bowsers have been an obvious place to look for the cause of Australia's latest inflation rise. Automotive fuel prices rose 23.6 per cent in the 12 months to September 2026, and 9.4 per cent in the month of September alone, according to the Australian Bureau of Statistics (ABS). With price moves that large, it would be easy to assume that the headline figure is simply being dragged up by a single, temporary shock.

The ABS publishes a measure designed to test exactly that assumption. The Consumer Price Index excluding volatile items takes out fruit and vegetables and automotive fuel, two categories whose prices can swing sharply from month to month for reasons such as weather and world oil markets. In the September 2026 release, published on 28 October 2026, that measure rose 3.7 per cent over the year.

Put simply, even after the most erratic items are removed, prices are still rising faster than the top of the Reserve Bank of Australia's (RBA) 2–3 per cent target range, and well above the 2.5 per cent midpoint the RBA uses as its reference point.

Three gauges, one message

The September CPI release offers three ways of reading the same basket of prices, and it is worth keeping them distinct:

  • Headline CPI: up 4.3 per cent in the 12 months to September 2026, up from 4.0 per cent in the 12 months to August.
  • Trimmed mean (underlying) inflation: 3.6 per cent annual, up from a revised 3.5 per cent in August.
  • CPI excluding volatile items: 3.7 per cent annual.

The headline figure captures everything households buy, including fuel and fresh produce. The trimmed mean is a statistical measure that removes the largest price rises and falls in any given period, regardless of which items they are. The "excluding volatile items" measure is more blunt: it always removes the same two categories, whatever they happen to be doing.

The gap between 4.3 per cent and 3.7 per cent gives a rough sense of how much the volatile items, especially fuel, are adding to the headline rate at the moment. But the more important point is what remains. A 3.7 per cent reading tells observers that inflation is not just a petrol story.

What is still inside the 3.7 per cent

Because the measure only strips out fruit and vegetables and fuel, several other notable price rises remain in it. Electricity prices rose 12.8 per cent over the year to September, which the ABS attributed mainly to the end of Commonwealth electricity rebates. That increase is still counted in the 3.7 per cent figure.

The broader Housing group rose 5.2 per cent annually, rents increased 3.6 per cent, and new dwellings were up 4.7 per cent. Tobacco rose 8.3 per cent. None of those categories is treated as volatile under this measure.

The ABS also reported that goods prices rose 4.6 per cent over the year and services prices rose 4.1 per cent. That spread suggests price pressure is showing up across a wide part of the economy rather than being confined to a handful of products.

This matters for the way the RBA reads the data. Temporary jumps in fuel prices can, in principle, fall away as quickly as they arrived. Price rises in services and housing-related costs tend to be stickier, which is why measures that look through volatility receive close attention from policymakers.

Why the RBA looks beyond the headline

The RBA's Monetary Policy Board has been clear that it sees more than an imported energy shock at work. At the media conference following the September decision, Governor Michele Bullock said on 29 September 2026: "Inflation is too high and has been driven by domestic capacity pressures."

She repeated that theme in her opening statement to the Senate Economics Legislation Committee on 28 October 2026, the same day the CPI was released, saying: "we still see inflation arising from domestic capacity pressures." In that statement she also cited global cost pressures linked to the Middle East conflict, AI-related demand and extreme weather.

That combination helps explain why a measure such as CPI excluding volatile items is useful. Fuel price spikes linked to world oil prices are visible and easy to identify. Domestic capacity pressures, where demand runs ahead of what the economy can sustainably supply, are spread across many prices at once and show up more clearly once the noise is removed.

Governor Bullock told senators that "Recently, inflation has been around 3½ to 4 per cent in year-ended terms." The September readings for both the excluding-volatile-items measure and the trimmed mean sit within that range, while the headline figure has moved above it.

A caution on reading any single month

The ABS now treats the monthly CPI as the complete measure of inflation, and the September data include one revision worth noting. The August trimmed mean was revised down from 3.6 per cent to 3.5 per cent because of a change in seasonal factors. Monthly figures can move around, and revisions are part of the process.

In the month of September, the CPI rose 0.8 per cent in original terms and 0.6 per cent seasonally adjusted, while the monthly trimmed mean rose 0.3 per cent seasonally adjusted. Comparing these monthly numbers shows again how much of the most recent movement came from the more volatile end of the basket.

No single gauge settles the debate. The headline rate reflects what households actually experience at the checkout and the bowser. The underlying and excluding-volatile-items measures attempt to show the trend beneath. Taken together, they point in the same direction: all three are above the target band.

The bottom line

Stripping petrol and fresh produce out of the CPI lowers annual inflation from 4.3 per cent to 3.7 per cent, but it does not bring it anywhere near the RBA's 2–3 per cent target. Electricity, housing costs, services and a range of goods are all still adding to price growth.

The RBA's Monetary Policy Board raised the cash rate target by 25 basis points to 4.60 per cent in September, its fourth increase of 2026, and 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". Its next decision is due on 3 November 2026 at 2.30 pm AEDT, and that outcome has not yet been determined. For readers trying to make sense of the debate, the excluding-volatile-items measure is one of the clearest signals that inflation pressure runs deeper than the price of fuel.