Headline inflation jumped to 4pc in August, up from 3.5pc in July

Headline inflation jumped to 4 per cent in August, from 3.5 per cent in July, driven by higher housing costs and automotive fuel prices.

The Reserve Bank lifted interest rates this week, to 4.6 per cent, and some economists think another rate rise is likely.

News figures show annual headline inflation jumped to 4 per cent in August, up from 3.5 per cent in July.

Trimmed mean inflation, the Reserve Bank's preferred measure of underlying inflation, remained steady at 3.6 per cent for the third month in a row.

The news comes a day after the Reserve Bank lifted interest rates for the fourth time this year, to their highest level in 15 years, to try to drag inflation down and stop high inflation becoming embedded in Australia's economy.

According to the Bureau of Statistics (ABS), housing was the largest contributor to annual inflation last month, reflecting rising costs for new dwellings and electricity.

"New dwelling prices rose 5.4 per cent in the 12 months to August as builders passed on higher costs for materials and labour," Rachael McCririck, ABS head of price statistics, said.

Transport was the second-largest contributor to annual inflation, due to higher automotive fuel prices.

"On a monthly basis, automotive fuel prices rose 14.8 per cent in August, compared to a rise of 7.5 per cent in July," Ms McCririck said.

"This was driven by higher world oil prices and the unwinding of the remainder of the federal government's fuel excise relief measures in August."

On Tuesday, the RBA's Monetary Policy Board increased interest rates by 0.25 percentage points, which lifted the cash rate target to 4.6 per cent, up from 4.35 per cent.

In a press conference on Tuesday, RBA governor Michele Bullock said underlying inflation had been sitting around 3.5 per cent for the last six months and the RBA wanted to drag it down.

"We can't influence that. That's what happened. So we now need to make sure that we have financial conditions tight enough to try to bring that down.

"We raised interest rates three times earlier this year, a lot of that effect is still to flow through … What we are predicting, what is the hope here, is that [four] interest rate increases will bring things down.