Inflation rose in the 12 months to December 2025, according to the latest Australian Bureau of Statistics (ABS) data. The consumer price index rose 3.8%, up from +3.4% in 12 months to November. The December data was ahead of expectations for forecasts of 3.6%. Higher prices for housing, recreation and culture along with food and non-alcoholic beverages drove increases in the index.

Prices for dairy and related products eased slightly in the 12 months to December, rising +2.9% for the period after peaking in the 12 months to November at +3.2% following monthly price increases since August. Prices increased in the year to December for other food groups, including bread and cereal products (+1.5%), meat and seafoods (+4.4%) and fruit and vegetables (+4.0%). 

Meanwhile, the Australian dollar gained significantly as a result of hot inflation and a weaker US dollar, rising above US$0.70 earlier this week for the first time in three years. With higher December inflation and a stronger Aussie dollar, analysts are suggesting the Reserve Bank could increase interest rates.