HomeBusinessInflation Eases in Australia: What It Means for Households and the Economy

Inflation Eases in Australia: What It Means for Households and the Economy

July Inflation Decline Led by Energy Rebates

In July, Australia’s inflation rate fell to 3.5%, down from 3.8% in June, according to the Australian Bureau of Statistics (ABS). This drop is largely due to government energy rebates, which lowered electricity prices significantly. 

Without these rebates, inflation would have been higher. Despite this positive news, the Reserve Bank of Australia (RBA) is not expected to cut interest rates soon, as underlying inflation, or “trimmed mean” inflation, remains at 3.8%, still above the RBA’s 2.5% target.

Challenges in Interpreting Inflation Data

While the decline in electricity prices, from an annual growth of 7.5% in June to -5.1% in July, contributed to the lower inflation rate, economists warn these figures can be misleading. 

Temporary cost-of-living relief measures like rebates cloud the true inflation picture. Paula Gadsby, a senior economist at EY, emphasized that the RBA needs more evidence before making any major policy changes. The central bank is likely to maintain a cautious approach and keep the cash rate steady for the rest of the year.

Source abc.net

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