Inflation data live updates: Jim Chalmers defends spending, RBA expected to raise rates in February

David Koch says inflation at 3.8 per cent is not the only figure Aussies should be concerned about, saying the trend paints a concerning picture of what could be ahead.

“It’s a bit of a shock because it’s at the higher end of what the markets were predicting,” Mr Koch, Compare the Market’s Economic Director said.

“It’s not just the number, it’s the trend. It’s the momentum and the direction where things are moving and it puts pressure on the Reserve Bank to think really seriously about putting rates up.

“Six months ago, employment and the jobs market were starting to soften and we thought, ‘great, rate cuts could be on the way’. That didn’t last long and now wages are putting pressure on CPI again.

“The Reserve Bank has always said that the latest data would inform their decisions. They’ve said that time and time again. History shows they will want to get in front of the issue but we’ve still got uncertainty overseas, and a rate hike would impact on our currency which in turn impacts exports. This will give them a lot to think about.”

Asked bluntly if the Albanese Government was spending too much, Dr Chalmers replied “no”.

“If our budget was the problem, if public spending was the problem, we would not have seen three interest rate cuts last year and the big moderation we saw in inflation,” Dr Chalmers said.

“Governor Bullock said at Senate estimates, she rejected the assertion (that) a different approach to fiscal policy would have meant a different approach to monetary policy.

“The Reserve Bank has not been highlighting (that) public spending is a factor.

“The Reserve Bank downgraded their outlook for public demand twice in August and again in November last year. The IMF has said not that long ago, our budget position is neutral.”

Dr Chalmers listed off a string of ways that the Albanese Government has offered up “cost-of-living help”, to Aussies, saying this spending was important.

“We do know that people are still under pressure. That’s why our responsible cost of living help is so important,” he said.

“We have the tax cuts on the way in the middle of the year, rolling out cheaper medicines, more bulk billing, student debt relief and the like.

“That’s because we understand and recognise Australians are still under pressure.

“We can see that in these numbers today, despite all the progress we’ve made in recent years.”

Treasurer Jim Chalmers has defended Labor’s spending, saying the inflation result for December reflects a recovery in the private sector and private spending.

“We are seeing this in other countries also but we know that doesn’t make it easier for Australians, who are confronting these cost-of-living pressures,” Dr Chalmers said.

“What’s very clear from the data is it reflects this, a resurgence in the private sector and not an increase in public sector spending. This is about a strong recovery in the private sector, a strong recovery in private spending, not a reflection on public spending.”

“Public final demand growth went down, not up, over the past year when it comes to the contribution made to our economy.

“This data is from the end of 2025, the story of 2025 was a big resurgence in private sector, as some of that public final demand growth, the measure of public spending took a back seat to a recovery in the private sector.”

Treasurer Jim Chalmers says the rise in inflation is “unsurprising”, blaming it on “temporary factors”, after the latest data saw December at 3.8 per cent.

“Inflation ticked up today in unwelcome but unsurprising ways,” Dr Chalmers said from Brisbane.

“Inflation is very substantially lower than when we came to office, but still higher than we would like.

“Today’s inflation data reflects a combination of temporary factors and some more persistent pressures as well.

“You can see the temporary factors like the unwinding of, particularly the state-based energy rebates, you can see some more persistent pressures in areas like market services and housing.”

Even before the latest inflation data was released, the Australian dollar on Wednesday morning had climbed above 70 US cents for the first time in two years, with currency markets bracing for an RBA hike on February 3.

Housing costs last year climbed by 5.5 per cent while education expenses went up by 5.4 per cent ahead of recreational services like gym memberships soaring by 4.4 per cent.

Overall services inflation is still a major challenge, soaring by 4.1 per cent over the year.

Goods inflation is also on the high side at 3.4 per cent.

Financial markets were already expecting a February rate rise, rating it as a 60 per cent chance.

Yields on one-year Australian Government bonds rose only slightly to 4.07 per cent, up from 4.06 per cent.

Read the full story.

Treasurer Jim Chalmers will front the media shortly after horror inflation data doomed Aussie borrowers to an almost-certain interest rate rise next week.

Dr Chalmers will speak at 12pm AEDT from Brisbane. We will bring you the latest updates from that media conference.

Home borrowers are now very likely to cop another interest rate rise next week with inflation even further above the Reserve Bank of Australia’s target band.

Inflation at the end of last year accelerated to 3.8 per cent, up from the 3.4 per cent pace in the year to November 30, following the end of the Federal Government’s $75 quarterly electricity rebates.

This consumer price index number was further above the RBA’s 2-3 per cent target.

But even without volatile items - like power prices, petrol, fruit and vegetables and holiday accommodation - underlying inflation was also on the high side.

The trimmed mean, the Reserve Bank’s preferred measure of inflation, climbed by 3.3 per cent over the year.

In December alone, it went up by 1 per cent, which economists suggest would almost certainly trigger an RBA interest rate rise on Tuesday next week.

Another 25-basis point interest rate rise would add $111 to monthly repayments on an average $694,000 new mortgage and undo the effects of the Reserve Bank’s August rate cut.

Read the full story.

Seasonally adjusted inflation rose to 3.8 per cent in December, creating a nightmare situation for the RBA and borrowers.

The largest contributors to annual inflation over the past 12 months were housing (+5.5 per cent), food and non-alcoholic beverages (+3.4 per cent), and recreation and culture (+4.4 per cent).

The rimmed mean - which strips out volatility - was 3.3 per cent for the 12 months to the end of December, up from 3.2 per cent in the previous quarter’s reading.

Deputy Liberal Leader Ted O’Brien and shadow minister for finance James Patterson have hit out at Treasurer Jim Chalmers over a “near $60 billion budget black hole”.

“The Treasurer has been caught attempting to conceal a near $60 billion budget black hole from the Australian people,” a joint statement said.

“Jim Chalmers claimed in his mid-year budget update in late December that his revised medium-term budget outlook is ‘broadly in line’ with what he took to the election. The truth is very different.

“On the basis of budget analysis by the Opposition, the projected deficit from 2029-30 through 2035-36 has blown out by close to $60 billion. The analysis was independently verified by highly respected independent budget economist Chris Richardson.

“Australians deserve answers. Where did this $60-billion budget black hole come from? Why weren’t voters told before the election? Why wasn’t it disclosed at the MYEFO press conference? And what else is the Treasurer hiding?”