Australia’s annual inflation rate for the second quarter has dropped to 2.1%, the lowest level since March 2021. This figure came in below market expectations of 2.2%, indicating that inflationary pressure continues to ease.
According to data released by the Australian Bureau of Statistics, the quarter-on-quarter inflation rate stood at 0.7%, also lower than the previous quarter’s 0.9% and the forecast of 0.8%. The main contributors to price increases in the second quarter were housing, food and non-alcoholic beverages, and healthcare. However, falling transportation costs helped offset some of the inflation.
Reserve Bank of Australia (RBA) Governor Michele Bullock recently noted that the decline in inflation was partly due to temporary cost-of-living subsidies provided by the government. However, she warned that as these subsidies phase out, inflation is expected to rise again toward the upper end of the target range by the end of this year or early 2026.
Analysts at the Commonwealth Bank of Australia believe the latest data provides strong support for a 25 basis point interest rate cut in August. With the unemployment rate rising to 4.3% and global economic growth slowing, the likelihood of a rate cut has increased.
Economists also predict that the RBA may cut rates four more times before the second quarter of 2026, potentially bringing the policy interest rate down to 2.85% in an effort to support Australia’s weak economic recovery and reduce the risk of inflation resurgence.