Australia’s consumer prices rose faster than expected in July, with the monthly CPI indicator climbing 2.8 per cent in the 12 months to July 2025, according to the Australian Bureau of Statistics (ABS).
The result, up from 1.9 per cent in June, marks the strongest annual increase since July last year and has dampened hopes of near-term interest rate cuts.
Michelle Marquardt, head of prices statistics at the ABS, said: “The annual movement increased from 1.9 per cent in June, and is the highest annual increase since July 2024.”
Housing costs were among the most significant contributors to the rise, up 3.6 per cent over the year. Within that category, rents, new dwelling purchases and utilities all recorded gains.
Real estate observers note that higher rents are not only squeezing tenants but also driving some towards home ownership sooner, even as affordability remains tight.
Electricity prices rose sharply, jumping 13 per cent in July.
“The increase in electricity prices was driven by the removal of government rebates in New South Wales and the Australian Capital Territory,” said Ms Marquardt.
Other household costs also added to the pressure, with food and non-alcoholic beverages up 3.0 per cent and alcohol and tobacco climbing 6.5 per cent.
The ABS also reported that measures of underlying inflation strengthened. The trimmed mean rose 2.7 per cent, while the exclusion-based measure reached 3.2 per cent, highlighting persistent price pressures even when volatile categories are removed.
For the housing market, the latest figures underline the challenges facing both renters and buyers. Rising rents add to the financial burden on households, while higher construction and utility costs make it more expensive to bring new housing stock to market.
With supply already constrained, these pressures are expected to prolong affordability issues in key markets.
Economists argue the spike complicates the outlook for monetary policy. The Reserve Bank has signalled that any decision to cut interest rates will be dependent on inflation returning to target.
The Real Estate Institute of Australia (REIA) said the data showed inflation rising to the top of the Reserve Bank’s target range and added weight to the case for lower interest rates.
REIA President Leanne Pilkington said:
“The monthly CPI indicator rose 2.8% in the 12 months to July, following a 1.9% rise in the 12 months to June.
Rents rose 3.9% in the 12 months to July down from a 4.2% rise in the 12 months to June. This is the lowest annual growth in rental prices since November 2022, consistent with stable vacancy rates across most capital cities. In monthly terms, rental prices rose 0.3% in July.
“New dwelling purchases by owner-occupiers rose just 0.4%, highlighting the sluggish pace of new development. Lower rates would reinvigorate construction activity, support employment, and help address Australia’s housing shortfall.”
Ms Pilkington said a rate cut should still expected in the November Reserve Bank meeting.
“REIA is urging the RBA to act. With housing still under pressure, a rate cut is not just warranted, it’s essential for a balanced and sustainable recovery.”
