Australia’s CPI Declines to Three-Year Low in August While Core Inflation Remains Stubborn

Australian consumer price index inflation eased as anticipated in August, reaching a three-year low due to government initiatives aimed at reducing high energy costs. However, the declines in core inflation were not as significant.

According to the Australian Bureau of Statistics, CPI inflation increased by 2.7% year-on-year, which aligned with expectations and marked a sharp decline from the 3.5% recorded the previous month.

Core inflation, which excludes volatile categories like fuel and fresh food, dropped to 3% in August from 3.7% the month before. Similarly, the annual trimmed mean inflation, which excludes even more unstable items, decreased to 3.4% in August from 3.8% in July.

Headline inflation reached its lowest level since August 2021 and remained within the Reserve Bank of Australia’s (RBA) annual target of 2% to 3%.

The softer inflation figures for August were primarily influenced by government measures to mitigate high electricity and fuel prices.

Despite CPI inflation falling within the RBA’s target range, the central bank indicated that this trend is expected to be temporary, with inflation anticipated to rise in the coming months. The RBA has maintained steady interest rates while keeping a cautious outlook.

The central bank projects that CPI inflation will sustainably achieve its target range by 2026 and is likely to maintain elevated interest rates until at least the first quarter of 2025.

Though core CPI inflation readings have dipped to their lowest levels in two-and-a-half years, they remain above the RBA’s target range.