📌 Key Takeaways

• Australia inflation rate dropped to 2.1% in Q2 2025 (vs 2.4% in Q1)
• Fuel prices fell 10%, easing overall goods inflation
• Housing, health, and recreation costs remained steady
• RBA’s trimmed mean inflation slowed to 2.7%, lowest since Q4 2021
• Services inflation cooled to 3.3%, a 3-year low

Australia Inflation Eases Further in Q2

Australia’s annual inflation rate fell to 2.1% in the second quarter of 2025, easing from 2.4% in the previous two quarters and coming in slightly below market expectations of 2.2%. This marks the lowest reading since Q1 2021, suggesting that price pressures in the economy are continuing to ease.

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🧾 Breakdown: Goods vs Services

Inflation in goods declined from 1.3% to 1.1%, mainly due to:

• A 10% drop in automotive fuel
• Easing prices for new dwellings
• Softer increases in food (3.0% vs 3.2%)
• Clothing prices slowing (1.2% vs 1.7%)

Meanwhile, services inflation fell to 3.3%, its lowest in three years, largely due to:

• Slower rent increases
• Easing insurance and financial service costs (3.1% vs 3.8%)
• Education costs cooling slightly (5.5% vs 5.7%)

Read More: Australia’s Central Bank Cuts Interest Rate

📊 Australia Inflation Data Snapshot – Q2 2025

🏦 RBA Outlook and Policy Implications

The Reserve Bank of Australia’s (RBA) trimmed mean inflation—its preferred measure—slowed to 2.7%, meeting expectations but showing further cooling from the previous 2.9%. This marks the lowest core inflation rate since Q4 2021.

With headline and core inflation both easing, the RBA is likely to maintain a wait-and-see policy stance in its upcoming meeting. Although still above the 2% target midpoint, inflation is now well within the central bank’s comfort zone.

🚨 What Stayed Sticky?

Not all categories saw relief:

• Housing inflation remained unchanged at 2.0%
• Health costs held steady at 4.1%
• Recreation remained at 1.7%
• Household services saw a slight acceleration to 1.0% from 0.7%

Final Thoughts

Australia’s softening inflation paints a promising picture for consumers and policymakers alike. But with some price pressures still lingering, especially in services, the RBA will likely proceed cautiously.

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