Inflation eases further
Headline inflation was a little more sedate than expected in the June quarter, at 0.7 per cent.
The weighted median analytical measure of inflation was just 0.57 per cent for the quarter.
In recent times, the trimmed mean inflation reading has become more favoured, and it was also softer than expected, at just 0.59 per cent for the June quarter, and 2.67 per cent for the year.
Tradables inflation has fallen to just 0.2 per cent over the year, in part due to lower oil prices.
Which leads to the obvious question: where is the residual inflation coming from?
I'm not really inclined to go into the politics of it all here, but the reality is that the renewables research bodies/consultants/lobbyists have not been disclosing the true financial costs of the energy transition, and the biggest increase in inflation this quarter was, once again, seen in electricity.
Follow
Aidan Morrison here for up-to-date commentary on the modelling of energy costs. Not that the modelling is even being disclosed any more...
In any case, it's happening, and so consumer electricity prices rose 8.1 per cent this quarter, following a 16.3 per cent rise in the March quarter, as the government rebates are gradually being used up.
In 2021, the government pledged to reduce energy bills by $275 by mid-2025, but instead they increased by up to 38 per cent or by more than $1,000 by 2024, to over $3,000 in some jurisdictions.
Naturally this is important from a policy perspective, because energy costs tend to flow through the costs of production, to department stores, retailers, and consumers, and ultimately through the entire economy.
Where else?
The other inflation has come from sin taxes on alcohol and tobacco, and population growth pressures pushing up prices in the health and education sectors of the economy.
Rental price inflation was also still 4½ per cent over the year to June 2025, but generally this index tends to lag asking rents due to the way in which rents are experienced by the housing market as a whole, so this figure will likely be a tailwind for lower inflation over the remainder of the year.
Finally, reported the ABS:
"Food inflation stayed elevated due to higher prices for Fruit and vegetables, up 4.6 per cent compared to 12 months ago.
‘Other notable price rises over the past 12 months were for Eggs, up 19.1 per cent as supply has been affected by bird flu outbreaks.
Coffee, tea and cocoa prices rose 9.4 per cent, with lower supply from major overseas coffee bean growing areas."
The wrap
Overall, these were some pretty kind numbers, to be fair, with both headline and underlying inflation lower than the median market expectations over the June 2025 quarter.
The government will surely be thrilled with the result:
The ABS also provided an updated monthly inflation indicator, which came in at just 1.9 per cent for the year to June, making Australia arguably the best placed of all of its peer group countries.
The Reserve Bank of Australia was awaiting further information last month on the labour force and inflation figures, with the unemployment rate since rising to a 43-month high of 4.3 per cent, and inflation slowing to sit comfortably within the target 2 to 3 per cent band.
As such, an interest rate cut is more than 100 per cent priced in for the August monetary policy meeting, and a total of three interest rate cuts priced in by the end of the year.
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The UK ONS reported that population growth over the year to June 2024 in England and Wales was the second highest on record, at 707,000, with 98 per cent accounted for by immigration.
This follows on from the record population growth of 821,000 over the year to June 2023.
The 1.5 million increase over two years means that housing supply targets are completely cooked...
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