Australia Inflation Eases, Underlying Risks Persist: RBA Hunter

Australia’s Q2 CPI reading came in “a touch softer” than expected, according to Reserve Bank of Australia Assistant Governor Sarah Hunter. She said headline inflation has continued to ease, although underlying price pressures, particularly from housing and services, remain persistent. Wednesday’s releases showed the country’s annual inflation eased to 3.9% in Q2 from a two-year high of 4.1% in Q1, though it remained well above the central bank’s 2–3% target band. Meanwhile, June CPI fell to a four-month low of 3.8%, driven largely by weaker goods inflation. Hunter also noted that the labour market is still tight, supporting elevated wage growth, and reiterated that monetary policy is primarily designed to manage demand rather than supply-driven costs such as energy or housing.

The annual inflation rate in Australia unexpectedly eased to 3.8% in June 2026 from both May's reading and expectations of 4.0%, but remained above the central bank's 2–3% target range. It was the softest increase since February, as goods inflation moderated to a four-month low of 3.5%, with transport costs rising at the slowest pace in four months (0.1% vs 3.3% in May) due to falling fuel prices. Inflation also slowed for health (3.7% vs 3.8%) and clothing and footwear (4.9% vs 5.0%). Meanwhile, price growth accelerated for housing (6.8% vs 6.5%), while inflation for food and non-alcoholic beverages remained steady at 3.3%. Services inflation also picked up to 4.0% from 3.7%. The trimmed mean CPI stood at 3.6% yoy, still the highest since September 2024 but below expectations of 3.7%, while the weighted median CPI rose 3.7%, after a 3.6% gain in May. Monthly, the CPI unexpectedly edged down 0.1%, marking its second consecutive monthly decline and defying expectations of a 0.2% rise.

The annual inflation rate in Australia unexpectedly slowed to 4.0% in May 2026 from 4.2% in April, coming in below expectations of 4.4% but remaining above the central bank’s 2–3% target range. It was the softest increase since February, as goods inflation moderated to 4.2% from 4.7%, with transport costs rising at the slowest pace in three months (3.3% vs 6.6% in April) as automotive fuel prices increased at their softest pace since February (7.7% vs 18.6%). Inflation also eased for health (3.8% vs 4.0%) and recreation (2.4% vs 2.5%). Meanwhile, price growth accelerated for food and non-alcoholic beverages (3.3% vs 2.8%) and housing (6.5% vs 6.3%). Services inflation also picked up to 3.7% from 3.5%. Meanwhile, the trimmed mean CPI rose 3.6% yoy, the highest since September 2024 and above expectations of 3.5%, while the weighted median CPI climbed 3.6%, after a 3.5% rise in April. Monthly, CPI fell 0.7%, the first decline since August 2025, compared with expectations of a 0.3% fall.