Australia’s inflation rate has continued its downward trajectory, easing to 2.1% in the June 2025 quarter, down from 2.4% in March. The latest CPI data released by the Australian Bureau of Statistics confirms a steady decline in consumer price growth, sparking renewed expectations of interest rate cuts ahead of the next RBA meeting in August.
The Consumer Price Index (CPI) — a key measure of inflation — showed that prices rose more slowly than anticipated, aligning closely with the Reserve Bank of Australia’s (RBA) previous forecasts. Importantly, the “trimmed mean” inflation, the RBA’s preferred metric for underlying inflation, also edged down from 2.9% to 2.7%.
This fresh inflation data comes at a critical time. At the last RBA meeting, board members voted to hold interest rates steady, citing the need for more data. However, with inflation now falling and the labor market showing early signs of softening, economists believe a rate cut is back on the table.
What’s Driving the Decline in Inflation?
The decline in the inflation rate in Australia is largely attributed to a sharp drop in automotive fuel prices, which fell 10% year-over-year. The average price for unleaded petrol dipped to $1.77 per litre in the June quarter, a significant decrease from the previous year.
Other sectors also contributed to the easing inflation. Food and non-alcoholic beverages remained stable at around 3%, while price increases in rents (+4.5%), insurance (+3.9%), and new dwellings (+0.7%) continued to moderate. Discretionary goods and services saw limited price growth, led by categories like international travel (+4.7%) and garments (+3.5%).
Market Reactions and Expert Views
Westpac’s chief economist Luci Ellis welcomed the figures, noting that they “confirm inflation is under control” and signal that the RBA now has room to cut rates. She forecasted further cuts in November, February 2026, and even May 2026.
“Today’s CPI data removes any awkwardness for the RBA,” said Ellis. “We’re now looking at inflation near the bank’s target range while the labor market appears to be easing. That’s the perfect setup for a rate reduction.”
David Bassanese, chief economist at BetaShares, echoed this sentiment. Although the trimmed mean came in slightly above the RBA’s May forecast of 2.6%, he argued that “near enough is good enough” for a rate cut. He emphasized that this quarter’s CPI data was more reliable than the ABS’s Monthly Inflation Indicator, which had previously underestimated inflation.
What This Means for the August RBA Meeting
With the RBA meeting just around the corner, all eyes are on the central bank’s response to the latest data. The official cash rate has remained unchanged for months, but mounting evidence of controlled inflation and a softening labor market could push the RBA to act.
Governor Michele Bullock had previously expressed caution, citing doubts about the reliability of monthly inflation indicators. But this quarterly report confirms that inflation is not only easing but is very close to the RBA’s comfort zone.
A cut in the cash rate could bring relief to households and businesses, especially startups and entrepreneurs looking for more favorable lending conditions. As the inflation rate in Australia edges closer to the RBA’s 2–3% target band, the upcoming RBA meeting could mark a policy shift.
Final Thoughts
The latest CPI report confirms a cooling inflationary environment in Australia. If this trend continues, Australians may finally see a change in monetary policy after months of economic uncertainty.
For startups and small businesses tracking macroeconomic trends, this shift presents both challenges and opportunities. Want to stay ahead of Australia’s fast-evolving business landscape?
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