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This means that anything not connecting via the local socket will fail, so most applications linking the postgres container will not work.
At least for me, pg_hba.conf was missing this:
host all all 0.0.0.0/0 md5
Normally this would be set up in https://github.com/docker-library/postgres/blob/master/9.5/docker-entrypoint.sh, but because we use initdb during the upgrade, that never happens.