Hello new monthly CPI, farewell multilateralism

This week delivered Australia’s new monthly Consumer Price Index (CPI) which arrived in the form of an uncomfortably high result. Headline inflation accelerated from an annual rate of 3.6 per cent in the month of September to 3.8 per cent last month. 

The trimmed mean measure also increased, from 3.2 per cent to 3.3 per cent. Both readings are above the top of the RBA’s target band for inflation. As we set out below, Martin Place has signalled that initially it will be cautious in how much weight it assigns to the new monthly series. Even so, this week’s result makes the case for a possible rate cut in February next year much harder to sustain (earlier this month, wehad already noted that the chances of a December rate cut had pretty much disappeared).

We also look back at the recent COP30 and G20 meetings and ask – in the year that saw April’s Liberation Day tariffs effectively toss the rules-based multilateral trading system into the trash – does multilateralism still have a future? At this point, it doesn’t look too hopeful.

There is also the usual roundup of further reading and listening, including initial reactions to yesterday’s UK Budget, which raised the UK tax take to a new record high. Australia’s fiscal position is in a far better place than that of the UK. But the warning signs – from Truss to Reeves – about what can happen if policy fails to grapple with low growth on the one hand and the vulnerabilities associated with an elevated public debt stock on the other, are still worth heeding.

Finally, a plug for an upcoming Webinar I will be doing with geopolitical expert and futurist Keith Suter on 10 December. The session is on Strategic Insights for 2026, and we’ll be discussing some of the geopolitical and geoeconomic forces that will help shape board decisions next year. As usual, the webinar will be free for AICD members, and I hope some of you can join us.

Australia has a new monthly inflation measure…and it was disappointingly high last month

This week brought the first release by the ABS of the new complete Monthly CPI, including time series data back to April 2024 (or April 2025 for annual changes). The numbers show the annual rate of increase in Australia’s new headline inflation rate rising to 3.8 per cent in October this year from 3.6 per cent in September. The market had anticipated a 3.6 per cent print, while the last quarterly reading had headline inflation at 3.2 per cent in the September quarter. A look at the available time series also shows that in recent months the new Monthly CPI has been running slightly above the old (and now discontinued) monthly CPI Indicator.

In the case of underlying inflation as measured by the new monthly version of the trimmed mean, the annual rate increased from 3.2 per cent to 3.3 per cent. Here, the consensus forecast had anticipated a three per cent outcome, so once more the result surprised to the upside. The last quarterly CPI measure had underlying (trimmed mean) inflation at three per cent.

Alternative measures of underlying inflation sent a similar message. The Weighted Median rose 3.4 per cent over the year and the CPI excluding volatile items and holiday travel was up four per cent.

According to the ABS, the largest contributor to the headline rate of annual inflation last month was the Housing Group, which rose 5.9 per cent and contributed more than 1.2 percentage points of the 3.8 per cent rise. Electricity prices (up 37.1 per cent in October after having risen 33.9 per cent in September due to the impact of the exhaustion of some State Government electricity rebates and the timing of the rollout of Commonwealth Energy Bill Relief Fund rebates) were a key part of the story, with a supporting role for rents (up 4.2 per cent). The Food and non-alcoholic beverages (which contributed 0.6 percentage points) and Recreation and Culture (0.4 percentage points) Groups both rose 3.2 per cent over the year and were also important drivers of the overall result.

By analytical measure, the annual rate of goods inflation accelerated from 3.7 per cent in September to 3.8 per cent in October, with electricity prices again playing a leading role. Services inflation rose from 3.5 per cent to 3.9 per cent over the same period, reflecting rises in Rents, Medical and hospital services (up 5.1 per cent) and Domestic holiday travel and accommodation (up 7.1 per cent). The Bureau explained that the jump in holiday travel prices was due to school holidays occurring in all states and territories in October, along with major sporting events in the same month, all of which boosted demand.

Tradables inflation was two per cent in annual terms while non-tradables inflation was 4.8 per cent. Discretionary goods and services rose 3.2 per cent while non-discretionary items rose 4.3 per cent.

The new monthly CPI, the RBA, and monetary policy

The new complete monthly CPI that debuted this month replaces the quarterly CPI not only as Australia’s leading measure of headline inflation, but also as the benchmark for the RBA’s inflation target.

In the past, the RBA has bemoaned the absence of a timelier indicator of inflationary developments than the one provided by the quarterly CPI. Most of its peer central banks, it noted, had the advantage of a regular monthly read on price developments. True, the now-discontinued Monthly CPI Indicator offered a partial if imperfect solution to the data frequency challenge. But Martin Place was never inclined to place too much weight on the quarterly measure’s poor relation. Now, the RBA finally has its long-desired monthly read on prices, which – it notes approvingly in the November 2025 Statement on Monetary Policy (SMP) – ‘brings Australia in line with international best practice’ and which ‘Over time…will support the RBA in making well-informed and timely monetary policy decisions.’

But do note the time-based qualifier in that welcome, since, as the SMP explains, it will take time to learn about the properties of the new monthly data series. As a result, the RBA will initially continue to focus on the measures of underlying inflation from the quarterly CPI, including the trimmed mean, to assess price pressures in the economy, as these ‘have well-understood properties and established seasonal patterns [and] will provide an important source of continuity while the properties of the new monthly series become clear.’ In support of this approach, the ABS will continue to publish the quarterly CPI for at least 18 months to aid the transition process. Over this period, the SMP explains that the RBA will evaluate measures of underlying inflation based on the monthly CPI. More detail on the RBA’s approach is available in this technical note.

All of which suggests that the RBA will not be inclined to over-interpret the signal coming from the October numbers. Although that is different from saying it will not pay them any attention.

What’s left of multilateralism?

It’s been a tough year for multilateralism – the idea of collective, coordinated action by countries to address global problems – and for the institutions that are supposed to implement it. The most prominent casualty to date has probably been the multilateral trading system and the WTO. As noted back in April, the first Trump administration had already undermined the role of the WTO by blocking new appointments to the appeals court and thereby rendering the dispute settlements system dysfunctional. The second administration has taken this to a new level. After pausing its financial contributions to the WTO in March this year, ‘Liberation Day’ and its ‘reciprocal’ tariffs took things further, striking at the ‘most-favoured nation’ (MFN) principle that has been foundational for the world trading system since the WTO’s predecessor, the GATT, was established in 1948.

The hits to the multilateral system have also gone beyond trade.

In January this year, President Trump announced that Washington was withdrawing from the Paris Agreement. Consistent with that position, the administration did not send any high-level US officials to COP30 in Belem, although state-level representatives did attend. To the extent that the Belem meeting was a test of multilateralism in the absence of US engagement, it wasn’t an enormous success. In the words of the Economist magazine, COP30 ended ‘with a whimper,’ simultaneously acknowledging that more climate action was needed while failing to provide it.

Just prior to the conference, the UN’s latest Emissions Gap Report had warned that although global warming projections based on the world’s current policy settings had fallen from just below 4C at the time of the Paris Agreement, they still stood at almost 3C. Even temperature projections based on the implication of conditional and unconditionally nationally determined contributions at 2.3C to 2.5C. That would put the Paris Agreement’s ambition to limit warming to 1.5C above pre-industrial levels out of reach and threaten the overarching goal to hold the increase in the global average temperature to ‘well below 2C’ above pre-industrial levels. Belem did almost nothing to change this. Instead, delegates spent much of their time arguing over previous commitments to move away from fossil fuels while according to some press reports, ‘geopolitical schisms spilled into climate policies.’ Reportedly, the meeting only reached a compromise after a retreat in the face of pressure from a Saudi- and Russian-led group to retreat from any formal reference to a phase out of fossil fuels.

To be fair, the record of previous COPS in delivering meaningful progress including those with a US presence has been…let’s say limited. Technological change has done most of the heavy lifting to date when it comes to emissions reductions. But Belem was not a great advert for multilateral policymaking.

Other signs that 2025 has been tough for the multilateral approach to climate and the environment include the failure earlier this year of the UN Plastics Treaty, and the inability of the International Maritime Organization to reach agreement on a reduction in emissions in maritime transport.

A second important gathering this month also suggested more generally that the institutions constructed under the old global order are struggling to maintain relevance under the new one. The G20 met in South Africa over 22 23 November. President Trump did not attend and his decision to boycott the meeting was seen as another example of US withdrawal from key multilateral organisations that raised questions over their ongoing salience. [Full disclosure: Back in my time as Director of the Lowy Institute’s International Economy Program, I was an unabashed fan of the G20 as a mechanism for boosting cross-border economic cooperation (pdf) and for offering Australia a seat at the ‘top table’].

If multilateralism is in decline, what will replace it? Given the global nature of several of the most pressing issues facing the world require some form of cross-border coordination, some kind of international framework remains necessary. But for now, it remains unclear what form this will take.

Other Australian data points to note

The ABS said that total construction work done in the September quarter of this year fell 0.7 per cent (seasonally adjusted) to $79.3 billion. That was up 2.9 per cent on the corresponding quarter in 2024. Within that overall value, total building work done was up four per cent in quarterly terms and 6.5 per cent on an annual basis to total $43.3 billion, with residential construction (worth $26.7 billion) up 4.2 per cent quarter-on-quarter and 8.5 per cent higher year-on-year. The corresponding growth rates for non-residential construction ($16.6 billion) were 3.7 per cent and 3.5 per cent, respectively. In contrast, engineering work done over the quarter at $36 billion was down 5.8 per cent to be 1.2 per cent lower on an annual basis.

Data on private new capital expenditure and expected expenditure for the September quarter of this year shows total new capex rising by 6.4 per cent in quarterly terms (seasonally adjusted) and by 6.9 per cent on an annual basis. The quarterly rise was the largest since the March quarter 2021 and the ABS reckons that a significant increase in spending on data centres, which reached a new high, was a key contributor to the lift in investment. According to the Bureau, equipment and machinery capex for the information media and telecommunications industry soared by 91.5 per cent, while overall capex for the sector rose almost 41 per cent. The ABS also highlighted strong growth in investment in air transport.