Easing inflation may give mortgage holders a reprieve on further repayment increases for now – but maybe not for long.

The consumer price index (CPI) rose 3.5% in the year to July, down from 3.8% in the year to June. But that was a smaller fall than had been predicted.

The Reserve Bank of Australia’s preferred measure of underlying inflation, the trimmed mean, was unchanged at 3.6%. (The trimmed mean is the average rate of inflation after “trimming” away the items with the largest price rises or falls, leaving the weighted average of the middle 70% of items.)

The prices of what the Australian Bureau of Statistics (ABS) terms “non-discretionary” purchases – such as food, shelter, healthcare, car maintenance, school fees or compulsory insurance – rose by 3.7%.

This compares to the latest annual increase in wages of 3.2%. This means wages are still lagging price increases that are hard to avoid, adding to cost of living pressures on Australian households.

The latest data showed headline annual inflation benefited from lower growth in electricity prices (part of the “housing” group shown in the chart below, which shows the breakdown of cost changes within the CPI).

The annual increase in the cost of electricity fell back from 22.4% in June to 6.1% in July, reflecting the timing of rebate payments in 2025.

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