The Australian central bank is expected to raise interest rates again after the latest figures showed consumer prices were increasing faster than expected.
The drought has hit food production and sent prices soaring
The latest quarterly figures from the Bureau of Statistics mean that annual inflation is now just over 3%, above the central bank's 2-3% target zone.
Interest rates have already risen twice in 2006, to 6%, as the Reserve Bank of Australia tries to stem inflation.
Economists now say a rise to 6.25% in November is a virtual certainty.
"Forget discussion about a November interest rate hike - it's done and dusted, home and hosed, cut and dried," said Stephen Koukoulas, chief strategist at TD Securities.
Markets are also worried that the lengthy drought hitting Australian farmers will put even more pressure on food prices and thereby inflation.
Earlier this month, Australian Prime Minister John Howard warned that the drought conditions could end up knocking the country's economic growth.
Recent figures showed that the Australian economy's annual rate of growth slowed to 1.9% in the second quarter, the slowest pace in three years.