Inflation Falls to 4-Year Low, Boosting RBA Rate Cut Hopes

Australia’s inflation rate has eased to its lowest level since March 2021, with overall prices rising more slowly.

The Consumer Price Index (CPI) increased by 2.1 percent over the past year and 0.7 percent in the June quarter, according to new data from the Australian Bureau of Statistics (ABS).

The drop from an annual rate of 2.4 percent in the March quarter comes amid a broader easing of price pressures across fuel, housing, and key services like insurance and rents—raising hopes that the Reserve Bank of Australia (RBA) may cut interest rates in August.

“This is the lowest annual inflation rate since the March 2021 quarter,” said Michelle Marquardt, head of prices statistics at the ABS.

Underlying inflation—watched closely by the RBA—also cooled.

Trimmed mean inflation fell to 2.7 percent annually and 0.6 percent for the quarter. This measure strips out the most volatile price movements and is now squarely within the RBA’s target band of 2–3 percent.

At its July 9 meeting, the RBA held the cash rate at 3.85 percent, with Governor Michele Bullock saying the pause was about “timing, not a change in direction.”

She said the bank was waiting for clearer signs that inflation is falling, with August data expected to guide any decision on a rate cut. The RBA will meet on Aug. 12.

Fuel Prices Key To Annual Slowdown

Fuel was down 10 percent over the year, driven by lower global oil prices. This was a key factor pulling the overall CPI down, along with slowing price growth in housing and insurance.

Transport costs fell 0.7 percent over the quarter, with petrol down 3.4 percent in the June quarter alone.

Other categories also showed a clear easing trend. Annual inflation for goods dropped to 1.1 percent, while services inflation came in at 3.3 percent—its lowest level in three years—due to slower increases in rents and insurance.

Despite the easing overall, some costs are still going up.

Electricity prices rose 8.1 percent over the June quarter, as previous government rebates were used up in Brisbane and Perth.

“While electricity was up this quarter, it’s down 6.2 percent compared to 12 months ago as rebates remained in place for most capital cities,” Marquardt noted.

Food and non-alcoholic beverages increased by 1 percent for the quarter, driven by a 4.3 percent rise in fruit and vegetable prices due to seasonal shortages. Items like strawberries, blueberries, tomatoes, and cucumbers saw notable price hikes.

Health costs rose 1.5 percent, mainly due to a 2.3 percent jump in medical and hospital services after private health insurance premiums went up in April.

Chalmers Optimistic

Treasurer Jim Chalmers welcomed the figures, calling them “very encouraging.”

“These are pretty stunning numbers. When you consider when we came to office, inflation had a six in front of it. Now it’s around a third of that,” he told ABC.

Chalmers said the progress reflects easing pressures across headline, core, goods and services inflation—and shows Australia is on the right track.