Inflation Dips but Core Inflation Remains RBA Concern

A surprise dip in inflation has led to speculation that the Reserve Bank of Australia (RBA) may keep interest rates on hold at its August meeting, but core inflation remains a concern.

The Australian Bureau of Statistics (ABS) reported annual headline inflation had fallen for the third consecutive month to 3.8% in June, reducing pressure on the RBA to issue a fourth rate hike this year.

Housing was the largest contributor to annual inflation, with prices rising 6.8%, driven up by electricity costs (+22.4%), new dwellings (+5.8%), and rents (+3.6%).

Westpac has changed its forecast, now expecting the RBA to leave rates on hold at 4.35% for the next year, with the next move potentially down in August 2027.