Inflation figures show the cost of living is still too high, and borrowers could suffer
Key takeaways
- Today's Consumer Price Index figures show inflation is still not falling enough for the Reserve Bank's liking.
- Annual inflation is 4% over the last 12 months, down from 4.2% in the previous month's statistics. But the underlying inflation rate rose from 3.4% to 3.6%.
- What's next: Today's figures increase the chances of a rate hike at the next RBA meeting in August.
Another rate hike is on the table.
The Reserve Bank of Australia (RBA) has already hiked the cash rate 3 times in 2026 to bring inflation down. Today's inflation figures show it's not working.
Annual inflation rose 4% over the last 12 months. That's down from last month's 4.2%, but the RBA is targeting inflation under 3%.
And even worse, the trimmed mean inflation, a measure of inflation that smooths out volatile changes like fuel prices (which fell, thanks to the fuel excise cut and changes to oil prices), actually rose.
It's now 3.6%, up from 3.4% in the last month.
That's all according to the Australian Bureau of Statistics (ABS) Consumer Price Index, which measures rising prices across the Australian economy.
Housing costs were the main driver of inflation, rising 6.5% in the last 12 months. This increase was driven by rising electricity prices, rents and the cost of new dwellings.
House prices, meanwhile, are actually beginning to fall in many cities. If this trend continues it could soften housing inflation and bring next month's CPI numbers down closer to where they need to be.
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What does this mean for borrowers?
It's bad news for borrowers. Having already raised the cash rate three times this year, the RBA may raise again in August at its next meeting.
Another rate rise would bring interest rates up to levels not seen since 2011. This would increase borrowers' home loan repayments even further.
We don't know if the RBA will increase rates so soon. There are signs that Australia's economy is slowing down. A rate rise now could tip many people into financial stress.
But it's clear inflation is still too high.
Sources
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