Prices rose another 0.2% in November

Prices rose 0.2% through the month, below what the major banks were predicting.

Underlying inflation, excluding things with volatile prices like food and fuel, was 0.3% through November and 3.2% annually, down slightly from 3.3% in October.

While still outside of the RBA target range, it's a significantly lower inflation read than many were expecting, which could point away from the February rate hike that Commonwealth Bank and NAB are currently predicting.

What's still getting more expensive?

Unsurprisingly, housing was the biggest contributor to inflation over the twelve months captured, up 5.2% from November 2024 and rising 0.9% through the month.

Food and alcoholic beverages rose 0.3% through the month, up 3.3% annually in seasonally adjusted terms, although the Savings.com.au Grocery Price Index suggests food prices fell back slightly in December.

In seasonally adjusted terms (taking the Black Friday sales into account) the cost of furnishings and household equipment, health, and recreation and culture all declined in November, although annual health price inflation remains at 3.6% and outside of the RBA target range.

Will RBA be encouraged?

This result may be considered a material downside surprise given all four of the major banks were predicting between 3.6-3.8% annual headline inflation.

Most recent RBA forecasts are for annual headline inflation to be 3.3% by December and 3.2% underlying, so consumers and mortgage holders might be hopeful inflation is heading back under control.

However, the headline rate can be a little noisy, which may be amplified by the ABS' recent switch to comprehensive monthly inflation data rather than the previous quarterly.

The RBA has indicated that for now it will continue to focus on underlying inflation from the quarterly CPI data, despite the new comprehensive monthly set.

The drop in annual goods price inflation (3.2%, down from 3.8%) was mostly driven by a sharp drop in annual electricity price inflation from 37.1% to 19.7%, which was largely due to 'base effects' since prices rose dramatically in November 2024 as government rebates dropped off. 

Excluding the impact of rebates, annual electricity price inflation fell from 5.0% to 4.6%.   

A rate cut still appears highly unlikely anytime soon with inflation still outside of the target band, so the question remains whether or not the RBA will hike in February.

After the December monetary policy decision Michele Bullock said the Board may consider a hike if the data suggests "persistent" inflation.

"[If] when we get more data, [inflation pressures] look to be persistent...not in one-off items, then I think that does raise some questions," Ms Bullock told media.

"If inflation...looks like it is not coming back down towards the Board's target...the Board might have to consider whether or not it's appropriate to keep interest rates where they are or in fact at some point raise them."

Service price inflation, which Ms Bullock has flagged is proving "sticky", is likely to be looked at closely - the price of services rose 3.6% over the twelve months to November.

That's still down from 3.9% in October though, partly due to the cost of domestic holiday travel and accommodation dropping nearly 3% through the month.

This could be crucial - Senior NAB economist Taylor Nugent believes the Q4 trimmed mean result is "sensitive" to the travel outcome. 

Prior to the next meeting though, the RBA will also have the December (and hence the Q4) inflation results to consider, so it may be too early to draw firm conclusions about the likeliest outcome when the February monetary policy decision does roll around.