Headline inflation slows to 3.8%, but core stays sticky

InflationHeadline slows to 3.8%, core still sticky

Annual headline inflation eased to 3.8% in June, down from May and below market expectations of 4.0%. It was the softest reading since February, though inflation remains above the RBA’s 2 to 3 per cent target band.

• On a quarterly basis, Q2 CPI rose 3.9% over the year, easing from a two-year high of 4.1% in Q1. Consumer prices unexpectedly fell 0.1% in the month, a second consecutive monthly decline against expectations of a 0.2% rise.
• Goods inflation did the heavy lifting, slowing to a four-month low of 3.5%. Transport costs rose just 0.1% over the year, down from 3.3% in May, as fuel prices fell. Health and clothing also softened.
• The relief was not broad based. Housing inflation accelerated to 6.8% from 6.5%, services inflation picked up to 4.0% from 3.7%, and food and non-alcoholic beverages held steady at 3.3%.
• Core measures remain sticky. The trimmed mean rose 3.6% over the year, still the highest since September 2024 though below the 3.7% consensus, while the weighted median lifted to 3.7% from 3.6%.
• RBA Assistant Governor Sarah Hunter called the result a touch softer than expected, noting that housing and services pressures are persistent and that a tight labour market continues to support elevated wage growth. Markets have sharply cut the odds of a further hike at the 11 August meeting, but with inflation still above target the Board will want more evidence before declaring the job done.

Consumer ConfidenceConfidence falls 4.4pts

HousingBuilding approvals: units drive the rebound

• Total dwelling approvals rose 7.2% in June, lifting the annual pace to 8.9%. The rebound was driven by units, with private unit approvals up 17.8% on the back of a sharp rise in high-rise projects.
• Detached housing was steady rather than strong, with private house approvals up 0.4%. Queensland led the gains and NSW and WA also rose, while South Australia and Victoria went backwards.
• The value of residential approvals rose 15.1%, but a slump in non-residential work, led by other commercial buildings, dragged the total value of approvals down 5.5%.
• Recent RBA rate rises and still-elevated construction costs remain headwinds, so the approvals pipeline is likely to stay uneven from here.

Foreign ExchangeAUD slips below US$0.695 as inflation cools

• The Australian dollar fell below US$0.695, its weakest level in two weeks, after softer inflation data cooled expectations of further tightening. Headline inflation eased to a four-month low of 3.8% in June, below both May’s reading and forecasts of 4.0%, while monthly consumer prices fell 0.1% for a second straight month.
• Core measures also undershot. The trimmed mean rose 3.6% over the year against 3.7% expected, with quarterly core inflation up 0.8%, likewise below forecast.
• Markets moved quickly, cutting the probability of another hike this year to around 50% from more than 90% before the release, and all but ruling out a move at the 11 August meeting.
• The Aussie had traded near multi-week highs earlier in the month, before Governor Michele Bullock warned that a further hike may still be needed and that the near-term outlook remains highly uncertain. With inflation still above the 2 to 3 per cent target band and the RBA in data-watching mode, the currency looks range-bound near term.

Where We HelpNavigating commercial lending

Whatever stage your business is at, we structure lending across our 60+ lender panel to fit. Three broad categories of where we can help:

Sources: ABS Monthly CPI Indicator and Quarterly CPI (June quarter 2026), ABS Building Approvals (June 2026), RBA, Westpac Economics (Weekly, 27 July 2026), ANZ-Roy Morgan. This summary is for informational purposes only and should not be considered financial advice. Always consult a professional before making investment decisions.