This rise in inflation expectations, coupled with growing unemployment, poses a challenge for the RBA. Historically, such conditions can lead consumers to alter their financial behaviours—seeking higher wages, accelerating significant purchases to avoid looming price hikes, or curbing spending due to job insecurity.
The sentiment of making major purchases has also declined, with confidence falling to 85.6 points. ANZ economist Sophia Angala noted that the recent stalling in annual disinflation may have fueled inflation concerns. Consumer confidence has been trending downwards across housing demographics, especially among renters, who now report the lowest confidence levels.
Short-term economic confidence over the next year has decreased by 3.2 points, while expectations for the next five years also slipped by 2.5 points, dropping overall confidence below the historical average of 109.3 points since 1990.
Pressure mounts on the RBA, as trimmed mean inflation verges on 1.0% for the last quarter, exceeding both the RBA's and market expectations. Annual inflation stands at 3.0%, while headline inflation for September 2025 peaked at a quarterly rate of 1.3%, marking the most substantial increase since March 2023. Annual headline inflation climbed to 3.2%.
Further complicating matters is the rise in Australia’s unemployment rate to a four-year high of 4.5%. Warren Hogan, Chief Economic Adviser at EQ Economics and Judo Bank, highlighted that maintaining current interest rates might benefit mortgage holders amid economic recovery challenges, noting that any assumptions of rate cuts are misguided given the inflation trajectory.
