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IBISWorld forecasts the CPI to average 103.5 index points in 2026-27, which represents a 3.5% rise over the previous year. This marks only a slight moderation from the 3.7% increase recorded in 2025-26, with inflation remaining above the RBA's target band. Global oil prices have stayed high as the US-Israel conflict with Iran continues to disrupt energy supply, with the RBA's August 2026 Statement on Monetary Policy noting that Brent crude was around 10% above pre-conflict levels in early August. According to the ABS, the CPI rose 4.0% over the year to August 2026. Automotive fuel prices jumped 13.5% as the Federal Government's temporary fuel excise cut from April 2026 was partly unwound in July and fully unwound in August, pushing transport costs up 5.6%. Electricity costs rose 13.2%, largely due to the end of Commonwealth electricity rebates. Service prices also remain elevated, rising 3.7% over the year to August 2026, although growth in childcare costs has slowed. Housing was the largest contributor to annual inflation in August 2026, rising 5.7%, with new dwelling prices up 5.4% as builders passed on higher costs for materials and labour. The RBA's interest rate increases, which have lifted the cash rate to 4.60% following a further hike in September 2026, are weighing on consumer demand, with the RBA's Monetary Policy Board noting in September 2026 that earlier increases had tightened financial conditions and the economy appears to be slowing.The RBA uses monetary policy to keep inflation within a target band of 2-3%, averaged over the economic cycle. This allows inflation to run above the band for part of the cycle to support full employment, although the lagged effect of policy changes and forecasting errors mean fluctuations can occur. The CPI rose at multi-decade-high rates over the two years through 2022-23, driven by global supply chain disruptions, strong post-pandemic demand and a sharp increase in housing costs, exacerbated by sizable government stimulus programs and easy monetary policy. The RBA raised the cash rate from May 2022 through to late 2023 to manage this rampant inflation, weighing on consumer spending and flowing through to slower price growth. As inflationary pressures eased in 2024, many central banks began cutting rates, with the RBA following in February, May and August 2025. However, inflation pushed back above the target band in the second half of 2025, and the expiry of the Federal Government's electricity rebates at the end of 2025 placed further upwards pressure on headline inflation. The RBA responded with rate hikes in February, March, May and September 2026, with its August 2026 Statement on Monetary Policy noting that several other central banks have also raised policy rates in 2026 over concerns that inflation will exceed targeted ranges.According to the RBA's August 2026 Statement on Monetary Policy, inflation has remained high in components closely linked to domestic capacity pressures, such as market services and new dwellings, with conflict-related cost increases also passing through to construction prices. It also highlighted capacity constraints, including a labour market that remains a little tight, elevated unit labour costs and weak productivity, as factors amplifying inflationary pressures. Factors like global oil prices, the labour market, domestic demand and interest rates will continue to heavily influence CPI growth over the coming quarters.Real GDP and residential housing prices have lifted over the past five years, supporting growth in the CPI. Furthermore, the Federal Government's fiscal policies and the RBA's monetary policies have supported CPI growth over the past five years, particularly during the pandemic. While public demand has been a key contributor to economic growth over most of the past five years, private demand has recovered as household consumption strengthens. Overall, IBISWorld forecasts the CPI to increase at a compound annual rate of 4.2% over the five years through 2026-27.