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# US inflation is easing. Australia has the harder problem
- URL: https://www.benchmarkanalytics.com.au/us-inflation-is-easing-australia-has-the-harder-problem/
- Published: 2026-10-07T00:49:27.000Z
- Updated: 2026-10-07T00:49:26.000Z
- Description: Inflation remains above target in both the US and Australia, but America's underlying numbers have improved considerably more. The problem for both central banks is that labour markets are now weakening at the same time.
- Author: Nick Hossack
- Tags: Inflation, US, Jobs, US Inflation vs Australia, Trimmed Mean Inflation, Core Inflation

US inflation remains too high, but the underlying picture is considerably better than Australia's.

The latest US Consumer Price Index rose **3.4% over the year to August**, with prices increasing 0.4% during the month. Gasoline prices rose 3.9% and accounted for more than one-third of the monthly increase. But core inflation — excluding food and energy — was only **2.4% annually**.

The Federal Reserve's preferred PCE measure tells a slightly less comfortable story. Headline PCE inflation was **3.4%**, while core PCE remained at **3.0%**. In August alone, core PCE rose 0.2%.

That leaves US inflation above the Fed's 2% goal, but underlying inflation has moved substantially closer to target.

Australia's problem looks harder.

Australian headline inflation reached **4.0% in August**, while trimmed mean inflation remained at **3.6% for a third consecutive month**. Importantly, non-tradables inflation — prices more influenced by domestic conditions — was still **4.5%**.

Energy has pushed up inflation in both economies, but the Australian shock has been much larger. US gasoline prices rose 3.9% in August. Australian automotive fuel prices jumped **14.8% in one month** and were 13.5% higher over the year. Electricity prices were also up **13.2% annually**.

The monetary-policy response is consequently similar but not identical. The Federal Reserve raised its target range in September to **3.75–4.00%**, while the RBA lifted Australia's cash rate to **4.60%** two weeks later. Both central banks judged inflation too high.

The complication is employment.

US payrolls increased by just **29,000 in September**, with unemployment at 4.2%. Australian unemployment is already **4.6%**.

Both central banks therefore confront an increasingly difficult combination: inflation above target while labour markets lose momentum.

But Australia's starting position is worse. US core CPI has fallen close to 2%; Australia's preferred underlying measure remains well above the RBA's 2–3% target band.

The next phase of the inflation fight is therefore less about whether headline energy prices rise or fall — and more about whether those shocks spread into the broader price system.

| BENCHMARK ANALYTICS \| INFLATION US inflation versus Australia Both economies face energy inflation and softer labour markets — but Australia's underlying inflation problem is larger. UNITED STATES 3.4% Headline CPI AUSTRALIA 4.0% Headline CPI US CORE CPI 2.4% Ex food & energy AUSTRALIAN TRIMMED MEAN 3.6% Underlying inflation The energy shock US gasoline — August m/m +3.9% Australian automotive fuel — August m/m +14.8% Australian electricity — annual +13.2% Central banks are still tightening 3.75–4.00% US Fed funds target 4.60% RBA cash rate Meanwhile, labour markets are cooling US September payroll growth +29,000 US unemployment 4.2% Australian unemployment 4.6% **The key difference:**US core CPI has fallen close to the Fed's 2% objective. Australia's trimmed mean inflation remains well above the RBA's 2–3% target band. Both central banks must now manage inflation while labour markets lose momentum. Sources: US Bureau of Labor Statistics; Bureau of Economic Analysis; Australian Bureau of Statistics; Federal Reserve; Reserve Bank of Australia. Core CPI and trimmed mean use different methodologies and are not directly identical measures. |
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