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Inflation has slowed to its lowest level since the height of the pandemic, falling back into the target range for the first time since 2021 – although an interest rate cut is unlikely to follow.
New data from the Australian Bureau of Statistics shows the quarterly consumer price index dropped to 2.8 per cent over the year to September, down from 3.8 per cent in June.
That's the lowest level since the March 2021 quarter, while quarterly inflation was at just 0.2 per cent – not since June 2020 and the outbreak of COVID-19 was it lower.
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"The September quarter's rise of 0.2 per cent is the lowest outcome since the June 2020 quarter fall which occurred during the COVID-19 outbreak and was driven by free childcare," ABS head of prices statistics Michelle Marquardt said.
"Annually, the September quarter's rise of 2.8 per cent was down from 3.8 per cent in the June quarter. This is the lowest annual inflation rate since the March 2021 quarter."
The ABS's monthly CPI data for August told a similar story of improving cost-of-living pressures, slowing to 2.8 per cent, and it eased once again for September, down to 2.1 per cent.
Treasurer Jim Chalmers said the new inflation data showed Australia is "on track for a soft landing in our economy".
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While welcome news for households, who have faced easing price rises in recent months, the figures are unlikely to lead to a pre-Christmas interest rate cut at next week's Reserve Bank meeting despite being in the 2-3 per cent target range.
Governor Michele Bullock has previously said she and her board are looking for signs that inflation is "sustainably" back to target.
While headline inflation drastically slowed on the back of government energy rebates and falling petrol prices, the main measure of "core" inflation – the trimmed mean – remains higher.
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It slowed to 3.5 per cent in September, its lowest level since December 2021, but still out of the target range.
Chalmers said the easing core inflation was positive news, and showed the drop in headline figures wasn't down solely to the federal government's energy rebates.
"While it's true that headline inflation is lower than underlying inflation, underlying inflation came off half a percentage point in one quarter," he said.
"Which is a very substantial drop…
"Our energy rebates are helping, and we're pleased with that, but underlying inflation's come off substantially as well, and that shows that broader underlying pressures in our economy are easing considerably as well."
