The annual rate of inflation fell to 2.1% in the year to June, according to new figures from the Australian Bureau of Statistics (ABS).
This is the lowest annual inflation rate since March 2021.
It comes after the Reserve Bank of Australia (RBA) said it needed more evidence that inflation was stabilising before it would decide to cut rates further.
Inflation
Inflation is a rate that measures the change in the price of goods and services overtime.
When inflation falls, it does not mean prices are falling — it means they are increasing at a slower rate than before.
The rate of inflation has been gradually trending down from a peak in December 2022, when it was at 6.8%.
In an update today, the ABS confirmed, “annual inflation to the June 2025 quarter of 2.1% down from 2.4% to the March quarter.”
“This is the lowest annual inflation rate since the March 2021 quarter,” the ABS said.
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Quarterly inflation figures are calculated based on the prices of a wider range of goods and services than the monthly figures, and are considered to be more representative.
Trimmed mean
When looking at inflation data, many economists focus on the ‘trimmed mean’. This is a measure of inflation that excludes volatile prices, such as petrol, to better understand longer-term changes in prices.
For the latest data, the annual trimmed mean was 2.7%, down from 2.9% in March.
The trimmed mean is also what the Reserve Bank of Australia (RBA) partly uses to inform its decision about the cash rate (which sets interest rates across the economy).
The RBA‘s target range for the trimmed mean is 2-3%.
At the last cash rate meeting earlier this month, the RBA decided to keep the cash rate the same at 3.85%. It said it was waiting “for a little more information to confirm that inflation remains on track to reach 2.5%”.
With the trimmed mean now confirmed to be on a downward trajectory, some economists are predicting the RBA will announce a rate cut at its next meeting on 12 August.
