Inflation has climbed back to 4 per cent, underscoring the Reserve Bank’s warning the battle against rising prices is far from over, just one day after it lifted interest rates.

Australian Bureau of Statistics data released on Wednesday showed the Consumer Price Index (CPI) rose 4 per cent in the 12 months to August 2026, up from 3.5 per cent in the year to July.

The latest reading remains well above the Reserve Bank’s 2 to 3 per cent target band.

The trimmed mean, the Reserve Bank’s preferred measure of underlying inflation, remained steady at 3.6 per cent for the third consecutive month. 

ABS head of price statistics Rachael McCririck said housing was the biggest contributor to annual inflation in August, rising 5.7 per cent as builders passed on higher costs for materials and labour.

Transport was the second largest contributor to annual inflation in August, rising by 5.6 per cent due to higher automotive fuel prices.

‘On a monthly basis, automotive fuel prices rose 14.8 per cent in August, compared to a rise of 7.5 per cent in July,’ she said.

‘This was driven by higher world oil prices and the unwinding of the remainder of the federal government’s fuel excise relief measures in August.’

Governor Michele Bullock (pictured) hoped the year’s four rate rises would be enough to bring inflation under control, but stopped short of ruling out another increase before Christmas

Housing was the biggest contributor to annual inflation in August, rising 5.7 per cent as builders passed on higher costs for materials and labour

Transport was the second largest contributor to annual inflation in August, rising by 5.6 per cent due to higher automotive fuel prices

The latest figures were released less than 24 hours after the Reserve Bank raised interest rates to their highest level in almost 15 years, adding hundreds of dollars a month to household budgets.

The jump in annual inflation is unlikely to give the central bank confidence price pressures are easing quickly, after governor Michele Bullock warned on Tuesday quarterly inflation needed to be running at about 0.6 per cent, rather than 0.8 or 1 per cent, for inflation to return to the Reserve Bank’s 2.5 per cent target.

In a unanimous decision on Tuesday, the board lifted the cash rate by 25 basis points to 4.6 per cent, fuelling fears more increases could follow before Christmas.

The increase takes the cash rate to its highest level since 2011 and means borrowers have endured four rate hikes in 2026 alone.

Speaking after the decision, Bullock said she hoped this year’s rate rises would be enough to bring inflation under control, but stopped short of ruling out another increase before Christmas if fresh shocks hit the economy.

‘We raised interest rates three times earlier in the year. A lot of that effect is still to flow through,’ she said.

‘What the hope here is, is that this will be restrictive enough. Will it be enough? I don’t know.

‘We just seem to keep getting hit with all these extra shocks.’

The central bank next meets on Melbourne Cup Day in November.