Inflation has eased to 3.5 percent, down from June’s 3.8 percent, raising speculation about a potential cash rate cut by the Reserve Bank of Australia (RBA) before its next meeting on September 24.
The July Consumer Price Index (CPI) reflects the impact of the federal government’s $300 energy bill relief fund, which has temporarily reduced household electricity costs by up to $75 per quarter.
Warren Hogan, Chief Economist at Judo Bank, noted that while the rebate has provided short-term relief, it is not a sustainable solution for long-term inflation trends. Without the rebate, Hogan suggests inflation would likely remain stagnant.
Key contributors to annual inflation include housing (+4.0 percent), food and non-alcoholic beverages (+3.8 percent), alcohol and tobacco (+7.2 percent), and transport (+3.4 percent). Underlying inflation, which excludes volatile items, was 3.7 percent in July, down from 4.0 percent in June.
Despite easing inflation, rates are still above the RBA’s 2-3 percent target range. Governor Michele Bullock has indicated that inflation is persistently high, with forecasts predicting a return to target levels by late 2025. She emphasized a cautious approach to avoid economic downturns while addressing inflation.
