The latest Consumer Inflation Expectation (CIE) for Australia, released on November 13, 2025, stands at 4.50%, a decline from October’s 4.80% but still above the 12-month average of 4.30% according to the Sigmanomics database. This reading reflects a tempered but persistent inflation mindset among consumers amid ongoing macroeconomic challenges.

Drivers this month

• Energy prices stabilized after recent volatility, reducing upward pressure.
• Housing costs remain a significant contributor, adding approximately 0.15 percentage points to inflation expectations.
• Food price inflation showed signs of easing, contributing -0.05 percentage points.

Policy pulse

The 4.50% expectation remains above the RBA’s 2–3% inflation target range, indicating that inflation expectations are still somewhat unanchored. This level suggests the central bank’s recent tightening cycle has yet to fully convince consumers that inflation will return to target.

Market lens

Following the release, AUD/USD depreciated slightly by 0.30%, reflecting market caution. Short-term government bond yields fell by 5 basis points, signaling expectations of a slower pace of rate hikes. The implied probability of a December rate increase dropped to 60% from 75% a week prior.

Core macroeconomic indicators provide essential context for interpreting the CIE. Australia’s headline CPI rose 5.10% YoY in October 2025, down from 5.30% in September, while wage growth accelerated to 4.20% YoY, the highest since 2022. Unemployment remains low at 3.70%, supporting consumer spending power.

Monetary Policy & Financial Conditions

The RBA has raised the cash rate to 4.10% over the past six months, aiming to curb inflation without triggering a recession. Financial conditions have tightened, with mortgage rates rising by 80 basis points since May. Credit growth slowed to 3.50% YoY, reflecting cautious borrowing.

Fiscal Policy & Government Budget

The federal government’s recent budget includes targeted support for low-income households and infrastructure spending, which may sustain demand pressures. The budget deficit is projected at 2.80% of GDP for FY2025-26, a slight improvement from 3.20% last year, indicating moderate fiscal consolidation.

External Shocks & Geopolitical Risks

Global commodity price volatility, especially in energy and metals, continues to influence inflation expectations. Geopolitical tensions in the Indo-Pacific region add uncertainty, potentially disrupting supply chains and trade flows.

Drivers this month

• Housing inflation contributed 0.15 pp, consistent with ongoing rental market tightness.
• Energy price stabilization subtracted -0.10 pp from expectations.
• Food price moderation reduced inflation expectations by -0.05 pp.

Policy pulse

The current CIE remains well above the RBA’s target band, indicating that inflation expectations are still elevated. This suggests that monetary policy tightening has yet to fully anchor consumer sentiment.

Market lens

Immediate reaction: AUD/USD slipped 0.30%, 2-year government bond yields declined by 5 basis points, and implied rate hike probabilities for December fell to 60%. These moves reflect a market reassessment of the inflation trajectory and monetary policy path.

Looking ahead, Australia’s inflation expectations are poised to remain elevated but may gradually ease if monetary and fiscal policies effectively moderate demand and supply constraints.

Bullish scenario (20% probability)

Inflation expectations fall below 3.50% by mid-2026, driven by sustained commodity price declines, easing wage growth, and successful RBA rate hikes. This would support a pause or cut in interest rates in late 2026.

Base scenario (55% probability)

CIE stabilizes around 4.00–4.50% through 2026, reflecting balanced risks. Monetary policy continues tightening cautiously, fiscal support remains targeted, and external shocks are manageable.

Bearish scenario (25% probability)

Expectations rise above 5.00% if geopolitical tensions escalate, supply chains worsen, or wage-price spirals intensify. This would force the RBA into more aggressive tightening, risking economic slowdown.

Structural & Long-Run Trends

Long-term inflation expectations have shifted upward compared to pre-pandemic levels, influenced by housing affordability crises, labor market tightness, and climate-related supply disruptions. These factors suggest a higher inflation floor than in previous decades.

The November 2025 Consumer Inflation Expectation reading of 4.50% signals a tentative easing from recent highs but remains elevated relative to historical norms. This reflects ongoing challenges for the RBA in anchoring inflation expectations amid persistent structural inflation drivers and external uncertainties.

Monetary policy will likely remain data-dependent, balancing inflation control with growth risks. Fiscal policy’s targeted support and global developments will also shape the inflation outlook. Market reactions suggest cautious optimism but underscore the fragility of the current inflation environment.

In sum, Australia’s inflation expectations are at a critical juncture. Policymakers and investors must monitor evolving data closely to navigate the complex interplay of domestic and external factors shaping inflation sentiment.

Key Markets Likely to React to Consumer Inflation Expectation

Consumer Inflation Expectation data is a key barometer for monetary policy and market sentiment in Australia. Markets sensitive to inflation trends and interest rate expectations typically react strongly to these releases. Below are five tradable symbols historically correlated with Australian inflation sentiment:

• ASX200 – Australia’s benchmark equity index, sensitive to economic growth and inflation outlook.
• AUDUSD – The Australian dollar vs. US dollar, reflecting currency market reactions to inflation and rate expectations.
• AUDJPY – Another key forex pair influenced by risk sentiment and monetary policy divergence.
• BTCUSD – Bitcoin’s price often reflects risk appetite shifts linked to inflation fears.
• BHP – A major Australian mining stock, sensitive to commodity prices and inflation trends.

Extras: Inflation Expectation vs. AUDUSD Since 2020

Mini-Chart Insight: Since 2020, Consumer Inflation Expectation and AUDUSD have shown a positive correlation. Periods of rising inflation expectations often coincide with AUD strength, reflecting higher interest rate expectations. For example, the mid-2025 inflation spike to 5.00% aligned with AUDUSD peaks near 0.75. Conversely, easing inflation expectations in late 2025 have seen AUDUSD soften to around 0.72, highlighting the currency’s sensitivity to inflation sentiment.

FAQs

What is the current Consumer Inflation Expectation for Australia?

The latest figure is 4.50% as of November 2025, down from 4.80% in October but still above the 12-month average of 4.30%.

How does Consumer Inflation Expectation affect monetary policy?

Elevated inflation expectations can prompt the RBA to tighten monetary policy to anchor inflation, while easing expectations may allow for a pause or easing of rates.

Why is Consumer Inflation Expectation important for investors?

It signals future inflation trends, influencing interest rates, currency values, and asset prices, thus guiding investment decisions.

Final Takeaway: Australia’s Consumer Inflation Expectation at 4.50% signals persistent inflation concerns despite recent easing. Policymakers face a delicate balance as structural inflation drivers and external risks keep expectations elevated, requiring vigilant monitoring and calibrated responses.

This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.

Sources

1. Sigmanomics database, Consumer Inflation Expectation data, November 2025 release.
2. Reserve Bank of Australia, Monetary Policy Statements, 2025.
3. Australian Bureau of Statistics, CPI and Wage Growth Reports, 2025.
4. Australian Government Budget Papers, FY2025-26.
5. International Energy Agency, Commodity Price Reports, 2025.