Australia Inflation Expectations Fall to Six-Month Low

Australia's consumer inflation expectations eased to 4.7% in July 2026, down from 5.5% the previous month, marking the lowest reading since January. The decline reflected moderating headline inflation, though still above the Reserve Bank’s 2–3% target. Meanwhile, underlying inflation remains sticky, with the trimmed mean CPI up 3.6% year-on-year in May, the fastest pace since September 2024. Governor Michele Bullock noted that three rate hikes since early 2026 have curbed domestic price pressures and limited spillovers from higher oil and commodity costs. The central bank has reiterated its commitment to restoring price stability, stressing that while inflation accelerated in late 2025 amid supply shocks and energy costs, tighter policy should gradually ease pressures.

Australia’s consumer inflation expectations eased to 5.5% in June from 5.6% in the previous month, marking the lowest reading since March and suggesting households are slightly less concerned about future price pressures. The decline comes as the Reserve Bank of Australia’s recent policy tightening filters through the economy. Governor Michele Bullock said the three rate hikes delivered since the start of the year have helped curb domestic inflation and limit second-round effects from higher oil and commodity prices. Policymakers have reiterated their commitment to returning inflation to the target corridor of between 2% and 3%, noting price pressures accelerated in late 2025 and remain elevated. Official data showed annual inflation slowed to 4.2% in April from 4.6% in March, though still above the RBA’s 2–3% range. Underlying inflation stayed sticky, with the trimmed mean CPI rising 3.4% yoy, the highest since September 2024.

Australia’s consumer inflation expectations fell to 5.6% in May 2026 from April’s more than three-year high of 5.9%. Still, concerns over stubborn price pressures persisted after a Reserve Bank official warned that the recent surge in oil prices amid the Iran conflict posed a challenge and risked lifting inflation expectations further. Meanwhile, minutes from the RBA’s May meeting showed policymakers expect underlying inflation to remain above 3% until late 2027, only returning to the midpoint of the 2–3% target range by mid-2028. Earlier data also highlighted lingering inflationary pressures, with Australia’s annual inflation rate accelerating to 4.6% in March, the highest since September 2023 and well above the central bank’s target band. The RBA in May delivered the third rate hikes, bringing borrowing costs to 4.35%, the highest level since January 2025.