Australian CPI Inflation Eases to Three-Year Low

Australian consumer price index (CPI) inflation eased to a three-year low in August, following government measures aimed at reducing high energy costs. Core inflation declined less significantly.

CPI inflation grew by 2.7% year-on-year, as reported by the Australian Bureau of Statistics on Wednesday. This reading matched expectations and showed a substantial drop from 3.5% reported last month.

Core inflation, which excludes volatile items like fuel and fresh food, fell to 3% in August from 3.7% the previous month. Annual trimmed mean inflation, which excludes even more volatile items, decreased to 3.4% from 3.8% in July.

This headline inflation represents the lowest level since August 2021 and falls within the Reserve Bank of Australia’s (RBA) target range of 2% to 3%.

The softer inflation figures for August were primarily driven by government programs aimed at controlling high electricity and fuel costs.

Despite CPI inflation falling within the RBA’s target, the central bank noted that this trend is expected to be temporary, projecting that inflation will rise in the coming months. The RBA has kept interest rates steady and maintains a hawkish outlook.

The RBA anticipates that CPI inflation will only sustainably reach its target range by 2026, with interest rates expected to remain elevated at least until the first quarter of 2025. Core CPI inflation readings remain elevated and are still above the RBA’s target range, although they are at their lowest levels in 2½ years.