This story was updated on 29 July 2026 following the release of the June Consumer Price Index.
Softer-than-expected inflation figures have weakened the immediate case for another Reserve Bank of Australia rate rise in August.
The Australian Bureau of Statistics said the Consumer Price Index fell 0.1 per cent in June, taking annual headline inflation from 4.0 per cent to 3.8 per cent.
Trimmed mean inflation, which provides a measure of underlying price pressures, rose 0.3 per cent during the month and remained steady at 3.6 per cent annually.
Both readings were below market forecasts cited by Oliver Hume Property Group Chief Economist Matt Bell, which had pointed to headline inflation of 4.0 per cent and underlying inflation of 3.7 per cent.
Mr Bell said inflation had now surprised to the downside for three consecutive months, despite earlier predictions that headline inflation could reach 6 per cent and underlying inflation 4.5 per cent by the end of the year.
“Today’s inflation result probably shifts the balance back to a longer period of the RBA holding on rates before the next move down occurs sometime in the second half of 2027,” he said.
“This is good news for residential markets already dealing with the fallout from the three previous hikes in February, March and May and Federal Budget uncertainty.”
Before the inflation figures were released, financial markets had priced in a 78 per cent chance of another 0.25 percentage point increase by the end of the year, according to Mr Bell.
The probability of an August increase had previously reached about 40 per cent, then retreated to approximately 25 per cent ahead of the CPI announcement.
While the softer result is likely to reduce pressure on the RBA to move at its 10–11 August meeting, inflation remains above the central bank’s 2–3 per cent target range.
Housing also remains a significant source of price pressure.
The ABS said housing costs rose 6.8 per cent over the year to June, making housing the largest contributor to annual inflation. Electricity prices increased 22.4 per cent, new dwelling prices rose 5.8 per cent, and rents increased 3.6 per cent.
Services inflation remained elevated at 4.0 per cent, while non-tradable inflation, which is more heavily influenced by domestic conditions, was 4.9 per cent.
The figures were released a day after RBA Governor Michele Bullock said the housing market had eased “by more than we had anticipated” in the bank’s May forecasts.
Speaking at the Anika Foundation Fundraising Lunch in Sydney, Ms Bullock attributed the slowdown to recent housing policy developments and a broader softening in market sentiment.
She said established housing price declines had so far been modest following a period of strong growth and were concentrated in Sydney and Melbourne.
Prices in those cities remain around their levels before the RBA began increasing interest rates in February.
Ms Bullock also said negative equity remained limited, affecting less than 1 per cent of borrowers, and that financial stability risks remained contained.
However, she stressed that monetary policy does not directly target property prices. Instead, the RBA considers how changes in housing values affect household spending, investment and inflation.
The cash rate has already risen three times in 2026 – in February, March and May – for a combined increase of 75 basis points to 4.35 per cent.
While Ms Bullock did not rule out another increase, she said the board’s decision would depend on whether current interest rates were restrictive enough to return inflation sustainably to target.
“If it looks like inflation is not coming down,” she said, the board would face difficult decisions about whether rates needed to rise again.
The June inflation result provides evidence that price pressures are beginning to ease, although the RBA will also consider labour market conditions, domestic demand and its updated economic forecasts before making its August decision.
For buyers and agents, a decision to hold rates would not restore the borrowing capacity lost through this year’s increases. It would, however, reduce the immediate risk of further reductions to buyer budgets and mortgage pre-approvals.
Canstar modelling previously showed that another 0.25 percentage-point increase would add approximately $92 per month to repayments on a $600,000 mortgage.
Combined with the three earlier increases, this would lift monthly repayments by about $364 in 2026, bringing repayments on that loan size to approximately $4,052 a month.
Mr Bell said the property market was likely to remain subdued until the outlook for interest rates became clearer, even if borrowers had to wait another 12 months for any reduction.
“Once purchasers can lock in their borrowing capacity and budgets with some degree of certainty, markets will start to stabilise,” he said.