Australia’s annual inflation rate climbed to 3% in August, the highest in a year, though easing core pressures may allow the Reserve Bank of Australia (RBA) room for further near-term rate cuts.
Data released by the Australian Bureau of Statistics (ABS) on Wednesday showed the monthly consumer price index rose from 2.8% in July, slightly above market expectations of 2.9%.
“The 3.0 per cent annual CPI inflation to August was up from 2.8 per cent to July, making this the highest annual inflation rate since July 2024,” said Michelle Marquardt, ABS head of prices statistics.
On a monthly basis, inflation was flat, as electricity prices dropped 6.3% following new government rebates in New South Wales and the ACT, while holiday travel and accommodation slid 3.5%.
Ms Marquardt noted that the rebate programmes played a significant role in shaping energy costs: “The annual rise in electricity costs is primarily related to households in Queensland, Western Australia and Tasmania having higher out-of-pocket costs in August 2025 than they did in August 2024.
"In August last year, State Government electricity rebates were in place for Queensland ($1000), Western Australia ($400) and Tasmania ($250). Over the year, those rebates have been used up and those programs have finished.
"Excluding the impact of the various changes in Commonwealth and State electricity rebates over the last year electricity prices rose 5.9 per cent.”
Core inflation provided some relief, with the trimmed mean easing to 2.6% in August from 2.7% in July. A measure that strips out volatile items and holiday travel, however, climbed to 3.4% from 3.2%.
The RBA has repeatedly stressed the volatility of monthly CPI data, placing more weight on quarterly figures in policy decisions. Interest rates were cut earlier this year in February, May and August, following declines in quarterly inflation.
Speaking on Monday, Governor Michele Bullock said the economy was “in a good place”, noting that inflation was on track to return to the midpoint of the 2–3% target band, while the labour market remained close to full employment.
The RBA expects headline inflation, which came in at 2.1% last quarter, to rise to 3.1% by mid-2026 as electricity rebates expire, while underlying inflation is forecast to remain steady around 2.6% over the next few years.
With unemployment at just 4.2% and growth holding firm, the latest CPI report signals little urgency for the central bank to accelerate rate cuts when it next meets on 29–30 September.
