Australia’s inflation rate continues to ease, with both headline and core measures now sitting comfortably within the Reserve Bank of Australia’s (RBA) 2-3% target range.
According to the Australian Bureau of Statistics, annualised inflation in May was 2.1% – down from 2.4% in April and 4.0% a year earlier. This was the tenth consecutive month that headline inflation had remained inside the RBA’s preferred band.
Meanwhile, the trimmed-mean inflation rate – which the RBA considers a more reliable measure of underlying inflation – also moderated. It came in at 2.4% in May, compared to 2.8% the month before and 4.4% the year before. Trimmed-mean inflation has now been within target for six straight months.
In its July 8 monetary policy announcement, the RBA said inflation had “declined substantially since its peak in 2022”, but noted that services inflation and domestic cost pressures remained persistent. The RBA expects inflation to return to the midpoint of its target range in 2026.
While the downward trend is encouraging, the RBA has signaled it will remain cautious and noted that inflation risks remain finely balanced, with global uncertainty and domestic cost pressures requiring close attention.