In August, Australian consumer price inflation reached a three-year low, aided by government rebates on electricity and a drop in petrol prices. Core inflation has also slowed down, and has reached its lowest level since early 2022. Despite the slowdown, the Reserve Bank of Australia (RBA) remains cautious. It has already indicated that the drop in headline inflation isn’t sufficient to warrant rate cuts in the short term.
Data from the Australian Bureau of Statistics showed the monthly consumer price index (CPI) rose 2.7% annually in August, down from 3.5% in July. Economists had expected an increase of 2.8%. Electricity prices plunged nearly 15% m/m, while petrol prices decreased by 3.1% m/m.
The RBA has held the cash rate steady at 4.35% since November, aiming to bring inflation within its 2-3% target while maintaining employment gains. However, core inflation remains elevated, with the trimmed mean rising 3.4% annually after increasing 3.8% annually in July - still above the RBA's target range. Services inflation, a significant contributor, grew by 4.2% annually in August, slowing slightly compared to July (4.4% annually).