Annual inflation cooled more than expected in November, easing pressure on household budgets despite major Black Friday and Cyber Monday spending opportunities.
The Consumer Price Index (CPI) rose 3.4% in the 12 months to November, a marked drop from the 3.8% recorded in October.
The all-important trimmed mean figure came in at 3.2%, marginally outside Reserve Bank’s 2-3% target range but slightly down from 3.3% in October.
REA Group senior economist Anne Flaherty said the slowdown "is good news" but warned "inflation remains too high".
This first economic snapshot for 2026 comes after an uncomfortable end to the year for borrowers. What started as a surprise inflation uptick in September turned into a more sustained pattern of higher inflation October.
Today’s figures will also be a relief for the Reserve Bank, which has been on the back end of criticism after it failed to accurately account for the rise in its forecasting.
CPI movement
| Month | Headline CPI | Trimmed mean |
| Jan 2026 | 3.4% | 3.2% |
| Nov 2025 | 3.4% | 3.2% |
| Oct 2025 | 3.8% | 3.3% |
| Sep 2025 | 3.6% | 3.2% |
| Aug 2025 | 3.2% | 3.0% |
A closer look
A CPI reading of 3.4% will be a pleasant surprise to households with a mortgage, with many economists having anticipated only marginal cooling at best.
Westpac forecasting in the lead up to the release of the data noted the bank expected annual inflation to remain unchanged.
Australia’s largest lender Commonwealth Bank had predicted a small easing, anticipating annual CPI to come in at 3.6%.
The biggest contributor to inflation in November was housing, up 5.2%, followed by food and non-alcoholic drinks (+3.3%) and transport (+2.7%).
Commonwealth Bank expected a far smaller easing than what November's CPI figure shows. Picture: News Corp Australia
Electricity costs, rising rents and new dwellings have been the largest contributor to the rise in the housing factors considered within the CPI calculation.
Dwelling approvals have been rising, with new Australian Bureau of Statistics (ABS) figures for November showing the total number approved rose 15.2% in November to 18,406.
Rate rises ahead?
The Reserve Bank will continue to look specifically at the trimmed mean figure ahead of its first meeting of the year next month.
This is calculated by "trimming" away the most volatile items CPI considers, those with the largest price changes, to get a more realistic picture of the underlying inflation trend.
While the dip in annual inflation is the best news borrowers could have hoped for to start the year, it’s undeniable hikes are now back into the conversation for the first time in more than 12 months.
Both Commonwealth Bank and National Australia Bank closed 2025 anticipating a rate rise next month, assumptions that might well change after this most recent data.
A rate hike in February could now be premature, though December CPI figures later this month will come just ahead of the RBA's first meeting of 2026, presenting the clearest picture for a path forwards.
RBA governor Michele Bullock has warned further easing is off the table. Picture: Hilary Wardhaugh
A prolonged period with the cash rate at its current level of 3.60% is expected by both ANZ and Westpac.
“It would be prudent for the RBA to wait and watch developments in the labor market. Recent softness in employment numbers makes it unlikely that growth in real wages will lift,” Deloitte Access Economics partner Stephen Smith said.
“Any policy response should be careful and cautious.”
Calculations under a microscope
November’s figures are the second release of the ABS’ more comprehensive monthly CPI, introduced in part to help the Reserve Bank forecast more frequently and make rates decisions which more information.
When the bank meets next in just under four weeks, the effectiveness of this new approach to data is likely to be discussed.
"Should high inflation persist, this will increase the chance of a rate rise come February’s meeting," Ms Flaherty said.
Markets are currently pricing in a 36% chance of a rate hike next month, making a fourth consecutive hold decision the more anticipated outcome.
The RBA will make its next cash rate decision on 3 February.
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