The Australian share market surged to near-record highs on Wednesday as slower-than-expected inflation in the June quarter bolstered expectations that the Reserve Bank of Australia (RBA) will lower interest rates next month.
The benchmark S&P/ASX 200 rose 51.8 points, or 0.6%, to close at 8,756.4, with six of the 11 industry sectors finishing in positive territory.
Consumer staples led the rally, as Woolworths climbed 1.6%, Coles lifted 1.7%, Endeavour Group added 1.2% and Treasury Wine Estates increased 0.7%.
Rate-sensitive real estate stocks also outperformed, with Goodman Group, Charter Hall, Mirvac adding 0.2%, 1.8%, and 2.7%, respectively.
Consumer discretionary shares lifted as well, with Wesfarmers adding 1.8%, Domino's Pizza up 1.4%, and JB Hi-Fi finishing 3.9% higher.
The catalyst for the rally was softer inflation data, with the Australian Bureau of Statistics' Consumer Price Index rising by 2.1% year-on-year in the June quarter, down from 2.4% previously. Quarterly inflation eased to 0.7%.
Core inflation, the RBA’s preferred measure, also moderated, falling to 2.7% annually from 2.9%, suggesting a broader cooling in underlying price pressures.
Money markets quickly moved to price in an almost certain rate cut in August, with Bendigo Bank forecasting a move at the 12 August policy meeting.
"An August cash rate reduction is all-but-certain, but it remains to be seen how big the cut will be," said Bendigo Bank Chief Economist, David Robertson.
“While a 50 basis points cash rate cut in August seems unlikely in light of Michele Bullock’s speech last week around consistency, a 35 basis points cut to the cash rate would take it down to 3.5% — which would be a sensible compromise,” Mr Robertson added.
Major financial companies finished higher, with Commonwealth Bank and Westpac up 1.6%, National Australia Bank lifting 0.7%, and ANZ adding 1.3%.
In corporate news, IGO slumped 7.2% after the miner flagged continued operational challenges at its Kwinana lithium hydroxide refinery.
Appen plunged 12.8% after warning full-year revenue would likely come in at the low end of its $235 million to $260 million guidance, citing uncertainty in the U.S. artificial intelligence market.
In contrast, Mineral Resources advanced 2.3% after meeting its FY25 production and cost targets across mining services, iron ore and lithium.
Pilbara Minerals surged 3% as it outlined higher production and lower cost forecasts for FY26.
PolyNovo led the market with a 7.8% rally after reporting full-year earnings between $11.2 million and $12.4 million, up significantly from $3.6 million in the previous year.
On the bond markets, the 10-year government bond yield declined 0.9% to 4.262%, while the 2-year yield dropped 1.2% to 3.327%.
