Inflation is slowing: are rate rises off the table?
Key takeaways
- New figures from the ABS show that monthly inflation rose 3.5% over the last 12 months.
- That's a drop from the previous month, when inflation rose 3.8%. Underlying inflation stayed flat at 3.6% for the third month straight.
- What's next: Today's figures make another interest rate rise from the Reserve Bank less likely, although it's still a possibility.
Inflation is slowing, according to the latest ABS statistics. Inflation rose 3.5% over the last 12 months.
While that's still higher than the RBA's 2-3% target band, it's a notable fall from last month's 3.8% inflation rate.
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What's driving inflation right now?
The main driver of inflation was housing once again, which rose 5.0%, mainly due to the cost of new dwellings.
But that's a marked decline from last month, when housing rose 6.8%.
Today's figures also show falls in the other main drivers of high inflation, with food and beverage costs rising 3.2% (down slightly from 3.3% last month) and recreation and culture rising 2.6% (down from 3.3% last month).
The trimmed mean or underlying measure of inflation stayed flat at 3.6% for the third month in a row. This figure smooths out temporary price volatility to give a more accurate picture of sustained inflation.
Fuel prices rose 7.5% last month, after the winding down of the fuel excise cut and rising tensions between the US and Iran.
What do these figures mean for you?
Falling inflation is good news for most of us. Prices are still rising, but at a slightly slower rate.
This suggests the Reserve Bank's interest rate rises are effective, and reduces the urgent need for another rate rise when the bank board meets again in September.
Another interest rate hold would be welcome news for struggling borrowers. According to Finder's 2026 Home Loan Report, 27% of Australian borrowers say they're either just scraping by on their home loan repayments or on the brink of default.
Rates are currently at a 2-year high. One more interest rate rise would take rates to levels not seen since 2011.
Sources
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