Inflation Eases in July 2024, But Still Above Target Range

New data from the Australian Bureau of Statistics (ABS) reveals a continuing decline in inflation, although it remains above the Reserve Bank of Australia’s (RBA) target range of 2–3%. The Consumer Price Index (CPI) for July 2024 shows an annual increase of 3.5%, down

from 3.8% in June, indicating that inflation is gradually easing.

When excluding volatile items such as fuel, fresh produce, and holiday travel, the underlying inflation rate stood at 3.7%, down from 4.0% the previous month. The trimmed mean inflation, which strips out the most extreme price changes, also dipped to 3.8% in July from 4.1% in June.

Key contributors to the annual CPI rise in July included housing (up 4%), food and non-alcoholic beverages (3.8%), alcohol and tobacco (7.2%), and transport (3.4%).

Despite the improvement, economists believe the July CPI figures are unlikely to significantly shift the RBA's policy stance. ANZ economists noted that the data is the first for the new quarter, when fewer services and non-tradable goods update their prices, making it less reflective of broader trends.

Westpac senior economist Pat Bustamante highlighted "positive signs" in the data. He remarked, “The underlying measures show inflation eased in July. Excluding volatile items and holiday travel, the inflation rate in seasonally adjusted terms fell from 4.0% in June to 3.7% in July. The monthly increase of just 0.08% was the lowest since July 2021, down from 0.32% in June and much lower than July 2023’s 0.42% and July 2022’s 0.71%. Disinflation is visible in areas like clothing, footwear, and household items, which were softer than expected."

While Bustamante emphasized that the numbers point to a stable inflation rate, he added, "This stability may give the RBA less urgency to raise interest rates further."