This article is general information only and does not constitute financial or tax advice. Consult a qualified tax professional for advice specific to your situation.
Key takeaways
- February CPI eased slightly to 3.7% annually, but remains well above the RBA's 2-3% target. Trimmed mean held at 3.3%.
- Housing inflation accelerated to 7.2%, with electricity costs up 37.0% year-on-year, directly increasing landlord holding costs.
- The Iran conflict oil shock (started 28 February) is absent from these figures. March data will look very different.
- Markets are pricing in roughly 70 basis points of further rate rises by year-end, adding around $230/month on a $500,000 loan.
- Higher costs mean larger tax deductions, but only if you track and substantiate every expense before EOFY.
The ABS released its February 2026 monthly CPI indicator on 26 March, and on the surface, the numbers look almost encouraging. Annual inflation eased to 3.7%, down from 3.8% in January. The trimmed mean held steady at 3.3%. For a moment, you might think things are calming down.
They are not. The February data captures a snapshot that ended before the Iran conflict began on 28 February. The oil shock, the petrol price spike, and the economic disruption that followed are all absent from these figures. This is the last set of inflation numbers that will look anything like normal for a while.
Here is what the February data actually tells us, and what landlords should be preparing for.
The February Numbers at a Glance
The ABS reported that the CPI was unchanged in original terms for February, with a seasonally adjusted increase of just 0.2%. The annual rate of 3.7% sits well outside the RBA's 2-3% target band, but the slight drop from January's 3.8% at least showed the trend heading in the right direction.
The trimmed mean, which strips out the most volatile price swings and is the RBA's preferred gauge of underlying inflation, came in at 3.3%. That figure has been sitting around the same level for several months now. Not rising, but also not falling fast enough to give the RBA room to cut rates.
For landlords, the category-level detail matters more than the headline figure.
Housing Costs Are Accelerating, Not Slowing
Housing inflation jumped to 7.2% annually in February, up from 6.8% in January. Three components drove that increase: electricity, new dwelling costs, and rents.
Electricity costs surged 37.0%, up from 32.2% the previous month. If you are paying electricity on a rental property between tenancies, or if your lease includes electricity as part of a bills-included arrangement, that cost is climbing fast. Even where tenants pay their own power, rising energy costs feed into every contractor's quote and every maintenance callout.
New dwelling costs (the price of building a home) continue to rise, which pushes up renovation and construction costs for landlords planning property improvements. If you have been putting off a bathroom renovation or kitchen update, the price is not getting cheaper.
Rents continue to trend upward nationally. This is one area where landlords benefit from inflation, as rental income rises alongside costs. But rising rents also attract political attention and regulatory responses, which every landlord should be monitoring at the state level.
Transport Is Cheap, but That Is About to End
Transport costs actually fell 0.2% annually. Automotive fuel dropped 7.2% year-on-year, which pulled the transport category down. Cheaper fuel in February meant slightly lower costs for tradespeople, property managers, and anyone else who drives to your rental property.
This is the part of the data that will look completely different by the time the March numbers come in. Petrol prices have already jumped over 40% since the Iran conflict began, with average prices reaching $2.38 per litre according to Roy Morgan data from mid-March. That increase has not shown up in any official CPI figure yet.
The Oil Shock Waiting in the Wings
The US-Israeli military action against Iran commenced on 28 February 2026, too late to affect February's CPI data in any meaningful way. But the flow-on effects are already visible in the real economy.
Westpac projects headline inflation could reach around 5.5% by mid-2026, driven primarily by the fuel price spike. The Strait of Hormuz, through which roughly 20% of global oil and gas passes, faces ongoing disruption. Modelling from the SBS, drawing on Westpac scenarios, suggests the conflict could add 1 to 1.5 percentage points to headline CPI depending on how long the disruption lasts.
ANZ-Roy Morgan consumer inflation expectations have already jumped to 6.9% for the week of 16-22 March. That is up 1.6 percentage points from February's reading of 5.3%. When consumers expect higher prices, they often get them, as businesses raise prices pre-emptively and wage demands follow.
For landlords, the most immediate concern is what this means for interest rates.
Rate Rises Are Back on the Table
Markets are now pricing in roughly 70 basis points of further tightening by the end of 2026, which would take the cash rate to around 4.8%, according to Yarra Capital analysis published by Fixed Income News Australia. That is three more quarter-point rises.
The RBA has a difficult choice. The trimmed mean of 3.3% shows underlying inflation was already sticky before the oil shock. With fuel-driven price increases about to push headline CPI significantly higher, the pressure to act will be intense, even if the RBA treats the energy spike as temporary.
If you hold an investment property with a variable rate mortgage, use our rate rise calculator to see what another 25 or 50 basis points would mean for your monthly repayments. You can also plug your numbers into the interest rate impact calculator to see the monthly, annual, and total cost over your remaining loan term. On a $500,000 loan, 70 basis points adds roughly $230 per month.
The silver lining for negatively geared landlords is that higher mortgage interest is fully tax-deductible. A rate rise increases your claimable expenses, which offsets some of the cash flow pain at tax time. If you are already negatively geared, rising costs actually increase the tax benefit, though they still hurt your cash flow. Use the negative gearing calculator to see how a rate rise changes your net tax position.
What Landlords Should Do Now
You cannot control the oil price or the RBA's decisions. But you can control how well you understand your own numbers.
Know your holding costs. If you do not already have a clear picture of what each property costs you to own, now is the time to build one. Mortgage interest, rates, insurance, electricity, maintenance, and strata fees are all rising. You need to know the total, property by property, before costs climb further.
Track every expense. Higher costs mean larger tax deductions, but only if you can substantiate them. A $500 electricity bill you forgot to record is a $500 deduction you will never claim. With the financial year ending in June, getting your expense tracking sorted now saves you from scrambling later. propkt lets you log expenses as they happen, categorised and ready for your accountant, so nothing falls through the cracks at EOFY.
Stress-test your cash flow. Run the numbers on what another 50 or 75 basis points of rate rises would do to each property. If one property tips from manageable to painful, you want to know that now, not after the RBA moves.
Run Your Cash Flow Numbers
Enter your rental income and expenses below to see where each property stands right now, and how much room you have if costs keep rising.
Enter your weekly rent to calculate property cash flow.
Review your rent. Rents are still rising nationally. If your current rent is below market and your lease terms allow an increase, the inflationary environment gives you a justifiable reason to bring it in line. Just make sure any increase complies with your state's notice periods and caps. The rent increase calculator can show you the annual income difference for any proposed increase.
The Bigger Picture
February's CPI data is a snapshot of an economy that was already struggling with inflation before a major geopolitical shock made everything worse. The 3.7% headline figure will likely look quaint by mid-year.
For Australian landlords, the next six months will test your cash flow. Higher electricity bills, potentially higher interest rates, and rising costs across the board will eat into your margins. The landlords who come through in the best shape will be the ones who already know their numbers, have their deductions documented, and have stress-tested their portfolios against realistic scenarios.
Frequently Asked Questions
What was Australia's CPI for February 2026?
The ABS reported that the Consumer Price Index rose 3.7% annually to February 2026, down slightly from 3.8% in January. Seasonally adjusted, the monthly increase was 0.2%. The trimmed mean, which the RBA watches most closely, held steady at 3.3%.
How does inflation affect rental property investors in Australia?
Inflation increases landlord holding costs directly through higher electricity, insurance, rates, and maintenance bills. If inflation triggers RBA rate rises, mortgage interest also goes up. On the positive side, higher costs mean larger tax deductions, and rental income tends to rise in inflationary periods.
Will the RBA raise interest rates again in 2026?
Markets are pricing in around 70 basis points of further tightening by the end of 2026, which would take the cash rate to roughly 4.8%. This is heavily influenced by the oil price shock from the Iran conflict, which has not yet appeared in official CPI data but is expected to push inflation significantly higher.
How much could the Iran conflict add to Australian inflation?
Modelling suggests a Strait of Hormuz disruption could add 1 to 1.5 percentage points to headline CPI. Treasurer Chalmers has indicated inflation could reach 5% with a prolonged conflict. Westpac projects headline inflation could reach around 5.5% by mid-2026.
Should landlords raise rent because of inflation?
Rent increases should reflect genuine market conditions and comply with your state's rules on timing and notice periods. Rising costs do put upward pressure on rents, but any increase needs to be within market range and legally permitted under your lease and tenancy laws.