Data from the Australian Bureau of Statistics (ABS) revealed that inflation in Australia increased by 3.5% year-on-year in July, a deceleration from June’s 3.8% rise and the lowest level since March. However, it was higher than the 3.4% increase anticipated by the markets.
One factor contributing to the decline in inflation may be the expanded Commonwealth Energy Bill Relief Fund rebate and the introduction of state government rebates in July, which effectively reduced household electricity costs.
Excluding volatile items such as fuel, fruit, vegetables, and holiday travel, the CPI still moderated from 4.0% to 3.7% year-on-year in July.
The Reserve Bank of Australia’s (RBA) trimmed mean inflation—a measure of underlying inflation—stood at 3.8%, down from 4.1% in June and marking the lowest level since early 2022.
The ABS July CPI report highlighted that the largest monthly gains were seen in Housing (+4.0%), Food and non-alcoholic beverages (+3.8%), Alcohol and tobacco (+7.2%), and Transport (+3.4%).
Australian Dollar vs. Major Currencies: 5-Minute Overview
Although July’s inflation numbers reached multi-month lows, the declines were modest enough to reinforce RBA Governor Bullock’s recent comments that underlying inflation remains “too high” and is declining too slowly to warrant a rate cut.
Traders are still anticipating an RBA rate cut in December, but today’s persistently high inflation figures suggest that Governor Bullock and her team may not need to pursue a significantly dovish monetary easing approach.
The Australian dollar, which initially fell slightly at the start of the Asian session, surged after the release of the persistently high inflation data.
Currently, the Aussie is experiencing minimal pullback against its major counterparts and is trading near its intraday highs.
