Australia’s Inflation Jumps to 2.8% in July, Highest in a Year

Aug 27, 2025

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Australia’s annual inflation rate rose to 2.8% in July, the highest level in a year, driven by surging electricity costs and price increases for housing, food and tobacco, the Australian Bureau of Statistics reported Wednesday.

The July figure was up sharply from 1.9% in June, ending months of easing inflation and marking the fastest pace of consumer price growth since July 2024.

“The 2.8 per cent annual CPI inflation to July was up from 1.9 per cent to June. This is the highest annual inflation rate since July 2024, following several months of easing inflation,” said Michelle Marquardt, ABS head of prices statistics.

Housing and Energy Costs Drive Increase

Housing costs rose 3.6% over the year, up from 1.6% in June, largely due to higher electricity prices. Electricity prices surged 13.1% in the 12 months to July, compared with a 6.3% decline in the year to June.

In monthly terms, electricity rose 13.0% in July alone. The ABS said the jump reflected the impact of Commonwealth Energy Bill Relief Fund (EBRF) rebates not being paid in July to households in New South Wales and the Australian Capital Territory.

“Households in NSW and ACT did not receive payments of the extended Commonwealth Energy Bill Relief Fund in July,” Marquardt said. “This meant those households had higher out-of-pocket costs for electricity.”

Rebates are due to resume in August, but July bills were further pushed up by annual electricity price reviews.

Excluding the EBRF impact, electricity costs rose 4.8% in July. With the rebate pause, however, measured prices rose 13.0%.

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Rents Ease but Remain Elevated

Rent inflation slowed slightly to 3.9% in July, down from 4.2% in June, marking the lowest annual growth since November 2022. The ABS said the moderation reflected stable vacancy rates across most capital cities.

New dwelling prices, meanwhile, rose just 0.4% over the year to July, unchanged from June, reflecting a subdued new home market.

Food and Groceries Up

Food and non-alcoholic beverage prices rose 3.0% over the year, consistent with the pace of increases over the past 11 months. Some categories saw sharper rises.

“While annual inflation eased for some food categories in July, coffee, tea and cocoa prices continued to rise, up 14.4 per cent in the past 12 months,” Marquardt said.

The increase was linked to poor weather in major coffee-producing countries, disrupting global supply.

Travel and Holiday Costs Jump

Holiday travel and accommodation rose 3.3% in the year to July, reversing a 3.7% annual decline in June. On a monthly basis, prices rose 4.7%, as school holiday demand drove up airfares and accommodation.

Underlying Inflation Also Rising

The trimmed mean measure of underlying inflation rose 2.7% in July, up from 2.1% in June and similar to levels three months earlier.

The CPI excluding volatile items and holiday travel, another key gauge, rose 3.2% over the year, compared with 2.5% in June.

Marquardt said these measures show that “inflationary pressures are broadening again after a period of easing earlier in the year.”

Alcohol and Tobacco Lead Price Gains

Alcohol and tobacco prices jumped 6.5% over the year, making them among the largest contributors to the CPI increase.

The ABS noted that electricity rebates are scheduled to resume in August for NSW and ACT households, which could ease measured prices in the next release.

Still, with electricity, housing and food costs all showing renewed upward pressure, economists are watching whether the Reserve Bank of Australia will face renewed pressure to keep monetary policy tight.

The ABS said the July CPI release incorporates monthly and quarterly updates across expenditure classes, with more detailed breakdowns available in its online data tables.

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