Australia's Inflation Eases to 3.8% in June but Stays Above Target

Australia's annual inflation rate eased to 3.8% in the 12 months to June 2026, down from 4.0% in May, according to the Australian Bureau of Statistics, marking the softest increase since February. The closely watched trimmed mean measure, the Reserve Bank of Australia's preferred gauge of underlying inflation, held steady at 3.6%. On a monthly basis, the consumer price index unexpectedly fell 0.1%, its second consecutive monthly decline. Goods inflation moderated to a four-month low as transport costs rose only marginally on the back of falling fuel prices, and price growth also slowed for health and clothing. However, housing remained the largest contributor to annual inflation, accelerating to 6.8%, while services inflation picked up to 4.0%. Despite the easing, headline inflation stays above the central bank's 2-3% target band, and the persistence of the trimmed mean measure gives policymakers little room for comfort. Economists note that a renewed flare-up in the Middle East conflict could push energy prices and inflation higher again in coming months, complicating the outlook for interest rates.