Australian Inflation Cools to 2.1%: RBA Relief in Sight? 📉
What happened: Australia's monthly Consumer Price Index indicator hit 2.1% annually in May 2025, down from 2.4% in April, marking the lowest inflation reading since October 2024, according to the Australian Bureau of Statistics released today. The trimmed mean—economists' preferred underlying inflation measure—dropped to 2.4%, its lowest level since November 2021.
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Why it matters: This puts Australia tantalizingly close to the Reserve Bank's 2-3% inflation target range, potentially opening the door for interest rate cuts that could ease mortgage stress for millions of households. The moderation comes from exactly where families feel it most: food prices cooling to 2.9% growth (down from 3.1%), rental increases slowing to 4.5% from 5.0%, and petrol averaging $1.73 per litre—20 cents cheaper than a year ago. For mortgage holders paying $3,000+ monthly on average loans, even a 0.25% rate cut could save $50+ per month.
Zoom out: Australia's inflation trajectory now mirrors global trends, with central banks worldwide shifting from aggressive tightening to cautious easing. The rental market slowdown—the first meaningful deceleration since December 2022—suggests housing supply initiatives and migration policy adjustments are finally gaining traction. Meanwhile, government electricity rebates artificially suppressed energy costs by 5.9% (they'd otherwise be up 2.0%), creating a policy-driven inflation buffer that won't last indefinitely.
Bottom line :The Reserve Bank now has cover to consider rate cuts, but the trimmed mean sitting at 2.4% means they'll likely wait for one more confirming data point before acting. Smart money says September becomes the pivot month.
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