Inflation reached 4.0% in August, a figure that arrived just a day after another interest rate hike, likely to be of concern to small business owners.
The Australian Bureau of Statistics (ABS) says the Consumer Price Index rose 4.0 per cent in the 12 months to August 2026, up from 3.5 per cent in July. On Tuesday, the Reserve Bank lifted the cash rate by 25 basis points to 4.60 per cent. It was the fourth rise this year and takes the rate to its highest level since 2011.
What the ABS found
Housing was the biggest contributor, up 5.7% over the year, according to the ABS. New dwelling prices rose 5.4% as builders passed on higher costs for materials and labour, and electricity also added to the increase.
Transport came second, up 5.6%, mostly because of fuel. The ABS says automotive fuel prices jumped 14.8% in August alone, driven by higher world oil prices and the end of the federal government's fuel excise relief.
Closer to the counter, meals out and takeaway food rose 4.1% over the year. The ABS puts that down to higher operating, ingredient and other input costs.
Trimmed mean inflation, which smooths out the biggest price swings, stayed at 3.6 per cent, the same as July, according to the ABS.
Squeezed from both sides
James Keene, Managing Director APAC at Employment Hero, says the figures land at a hard time for employers.
"Today’s higher inflation figures confirm what small business owners are feeling every single day: price pressures are stubbornly stuck. Coming right after yesterday’s rate increase to 4.60%, this puts local employers in a really tough position."
Keene then pointed to Employment Hero's latest Jobs Report to describe what employers are dealing with.
"Small businesses are getting squeezed from both directions right now. On one side, higher interest rates are pushing up borrowing costs and eating into cash flow. On the other, wage costs are climbing quickly. According to Employment Hero’s latest Jobs Report, employers are managing 4.5% annual wage growth, including a record 6.0% for part-time staff. Unsurprisingly, our data shows quarterly headcount growth slowed to just 0.6%, the weakest we've recorded all year. When inflation stays this high and forces further rate pressure, hiring is usually the first thing businesses have to freeze."
How owners are responding
Another survey adds some context on wage costs. The Australian HR Institute's September quarter Work Outlook found 39% of employers are looking for productivity improvements and 30 per cent plan to raise prices in response to this year's minimum and award wage increases. The same survey found just 8 per cent plan to cut jobs because of the rises.
Productivity was part of the RBA's reasoning this week. Its statement said weak productivity growth continues to constrain the economy's potential growth. Keene added his view on where small business fits into that conversation.
"Governor Michele Bullock spoke a lot about productivity this week and she’s right that it’s the key issue. But Australia's productivity problem isn't a lack of ambition from local business owners. It’s that small businesses are buried under manual admin and red tape. If we want businesses growing again, helping them adopt modern technology needs to be a core part of the fix."
The RBA has said it is prepared to lift the cash rate further if needed.