Australia’s headline CPI eased from 3.8% to 3.5% y/y in July, but still came in above 3.2% consensus. Monthly CPI rose 1.0% m/m, after a -0.1% decline in June, also slightly above 0.9% expected. More importantly for RBA, Trimmed Mean CPI held at 3.6% y/y, above 3.5% consensus, while monthly trimmed mean accelerated from 0.3% m/m to 0.5%, against expectations for another 0.3% increase.
Inflation pressure was not confined to one category. Housing was the largest annual contributor, rising 5.0% y/y, with new dwelling prices up 5.7% as builders passed through higher material and labour costs. Food and non-alcoholic beverages rose 3.2%, including a 4.5% increase in meals out and takeaway, while recreation and culture gained 2.6%. Transport inflation accelerated sharply from 0.1% to 1.6% y/y, with automotive fuel jumping 7.5% m/m as world oil prices rose and part of federal fuel-excise relief was unwound.
For RBA, sticky underlying inflation is the more important signal than decline in headline rate. Minutes released a day earlier showed Board explicitly considered whether it might be appropriate to tighten “pre-emptively” if upside inflation risks strengthened, while several members saw further tightening as “quite possible.” July data now give that camp fresh evidence: headline inflation is easing, but trimmed mean has stopped improving and monthly underlying momentum has strengthened. That keeps September meeting firmly live.
Data Summary
| Indicator | July | Expected | June |
|---|---|---|---|
| CPI y/y | 3.5% | 3.2% | 3.8% |
| CPI m/m, original | +1.0% | +0.9% | -0.1% |
| Trimmed Mean CPI y/y | 3.6% | 3.5% | 3.6% |
| Trimmed Mean CPI m/m | +0.5% | +0.3% | +0.3% |
Key Takeaways
- Australia headline CPI eased from 3.8% to 3.5% y/y in July, but still exceeded 3.2% consensus.
- More important for RBA, Trimmed Mean CPI stayed at 3.6% y/y and monthly trimmed mean accelerated from 0.3% to 0.5%, above 0.3% expected.
- Housing remained largest annual contributor at 5.0%, with new dwelling prices up 5.7% as builders passed through higher labour and material costs.
- Transport inflation accelerated from 0.1% to 1.6% y/y, while automotive fuel jumped 7.5% m/m on higher global oil prices and partial unwinding of fuel-excise relief.
- Report reinforces concern that underlying inflation is not cooling as quickly as headline rate suggests.
- Combined with RBA’s recent discussion of pre-emptive tightening and explicit focus on monthly inflation data, July CPI keeps September meeting firmly live.
Full Australia CPI release here.
