FX.co ★ Australia Q2 Inflation Rate Below Forecasts

In the second quarter of 2025, Australia's annual inflation rate decreased to 2.1%, down from 2.4% in the previous two quarters. This represents the lowest rate since the first quarter of 2021 and fell below market expectations of 2.2%. Inflation in services reached its lowest point in three years at 3.3%, compared to 3.7% in the first quarter, primarily due to slower increases in insurance and rent costs. Similarly, inflation for goods eased to 1.1% from 1.3%, largely influenced by a 10% reduction in automotive fuel prices and a significant moderation in the cost of new dwellings. Food prices decreased to 3.0% from 3.2%, while alcohol and tobacco prices dropped to 5.7% from 6.5%. Clothing prices also saw a reduction from 1.7% to 1.2%, and insurance and financial services fell to 3.1% from 3.8%. The recreation category remained steady at 1.7%, and education costs slightly declined from 5.7% to 5.5%. Meanwhile, transport costs decreased further to -2.6% from -1.0%. Conversely, inflation rates for housing remained unchanged at 2.0% and health at 4.1%, while it accelerated for household services, rising to 1.0% from 0.7%. The Reserve Bank of Australia's (RBA) trimmed mean increased by 2.7% year over year, aligning with consensus predictions but indicating a slowdown from 2.9% in the first quarter, and marking the lowest level since the fourth quarter of 2021.