Inflation shifts beyond fuel
Headline inflation accelerated to 4.3% in September, higher than expected ahead of November RBA’s meeting.
Transportation, housing and education were the main contributors, rising 8.7%, 5.2% and 4.7%, respectively, in seasonally adjusted annual terms.
Trimmed mean inflation was 3.6% in September, with August revised down to 3.5% following seasonal adjustments.
Elevated interest rates continue to constrain growth with further increases posing additional risks to the fragile economic outlook.
Labour market softens amid uncertainty
Australia’s labour market is easing, with unemployment was 4.7% in September. its highest level since 2021.
The composition of employment has also shifted, with part-time employment declined by 73,700 people while full-time employment rose by 34,400.
The share of employed people wanting and available to work more hours increased slightly, with the underemployment rate grew from 6.2% to 6.3%.
The uptick in September unemployment could signal a softer labour market to the RBA, although it is insufficient to eliminate the prospect of further rate rises.
Manufacturing margins remain under pressure
Operating margins across the Australian economy (excluding mining) have remained relatively stable over the past two decades, fluctuating within a narrow range and sitting at around 10-11% in recent years.
Manufacturing margins declined following the global financial crisis, associated with the exit of the auto industry.
They recovered from 2015 to return to near the all-industry level, reflecting the consolidation toward more competitive subindustries.
Following the post-pandemic recovery, manufacturer margins increased from 10% to 12% but declined in late 2025 and are now below the all-industry rate.
Wages continue to be above pre-pandemic
Wages grew 3.2% over the year in June quarter 2026, slightly down on the 3.4% a year prior.
Although annual wage growth has eased from its late 2023 peak of 4.3%, it remains above the 2.2% recorded in the December quarter 2019, prior to the COVID-19 pandemic.
Annual wage growth in the public sector continued to outpace the private sector for a sixth consecutive quarter, with wages rising 3.4% and 3.1% respectively, though both have eased from a year ago.
Several factors have kept wage growth elevated, including persistent inflation, the Fair Work Commission's 3.5% wage increase in 2025 for award-reliant employees, and stronger enterprise bargaining outcomes, with agreement wages rising 3.6% over the year.
Job vacancies continued to ease
Job vacancies fell to 325,000 in August 2026, down 0.9% over the quarter and 1.3% over the year.
The decline was driven by the private sector, particularly business goods and services, partly offset by growth in customer-facing roles such as retail.
Wholesale trade recorded the largest quarterly decline (-18.0%), followed by professional, scientific and technical services (-17.3%), while retail trade (+24.5%) and financial and insurance services (+14.1%) recorded the strongest increases.
Diverging manufacturing input costs
Manufacturing input prices rose 10.7% in 2025-26, but cost pressures varied widely across the sector.
Energy-related inputs increased by 5-25%, reflecting higher global fuel, metals and petrochemical prices. In contrast, many non-energy industrial goods, including electrical equipment, metal products, wood products and machinery, recorded price declines as global markets eased. Gas prices rose 1% and electricity prices fell 3%, providing some relief for energy-intensive manufacturers.
Overall, the energy crisis had highly uneven effects across manufacturing, with some industries facing significant cost increases while others benefited from lower input costs.
