Core prices remain stubbornly high

Australia’s headline inflation rate eased in June, but underlying price pressures showed little sign of relenting, reinforcing expectations the Reserve Bank of Australia will remain cautious on monetary policy.

The Consumer Price Index rose 3.8 per cent in the 12 months to June 2026, down from 4.0 per cent in May.

Inflation Pressures Remain

However, the Trimmed mean, the RBA’s preferred measure of underlying inflation, remained unchanged at 3.6 per cent.

Australian Bureau of Statistics data showed that automotive fuel has been excluded from the Trimmed mean every month since March 2026 after the conflict in the Middle East caused significant volatility in fuel prices.

ABS head of price statistics Rachael McCririck said the underlying measure continued to provide a clearer picture of inflation by looking through unusually large price movements.

Market Expectations

Ben Samuel, senior portfolio manager in First Sentier’s short term investments and cash team, said the inflation result came in below both market expectations and the RBA’s forecasts.

“Today’s inflation print came in slightly below expectations and below the RBA’s latest forecast, for both the headline and the trimmed mean series.

Markets had responded by almost completely pricing out the possibility of an August rate increase.

Bendigo Bank chief economist David Robertson similarly said the outcome made an August hike highly unlikely, although he warned the RBA was unlikely to abandon its tightening bias given ongoing risks from oil prices and supply chains.

Persistent Inflationary Pressures

While the headline figure moderated, several economists said the underlying data suggested inflationary pressures remained persistent.

BNY APAC macro strategist Wee Khoon Chong said the figures reinforced the view that inflation remained sticky rather than signalling a decisive disinflation trend.

Pitcher Partners chief investment officer Cameron Curko said the decline in headline inflation had been helped by lower fuel prices and weaker prices for clothing, household appliances and furniture, but warned those effects were unlikely to last.

State Street Investment Management APAC economist Krishna Bhimavarapu took a more constructive view, saying the latest figures suggested disinflation was gradually gaining traction.

VanEck head of investments and capital markets Russel Chesler argued the unchanged Trimmed mean was the more significant result.

“Today’s inflation print should not be mistaken for progress.

The Reserve Bank of Australia’s cautious approach is likely to continue, as they seek to balance the complex relationship between inflation, economic growth, and monetary policy.