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CPI data seals the deal for August RBA cut
Trimmed mean inflation is back into the RBA’s target band for the second quarter in a row, all but confirming Australia’s third cash rate cut on 12 August
30 July 2025
Trimmed mean inflation is back into the RBA’s target band for the second quarter in a row, all but confirming Australia’s third cash rate cut on 12 August
Trimmed mean inflation is back into the RBA’s target band for the second quarter in a row, all but confirming Australia’s third cash rate cut on 12 August.
The ABS June quarter CPI data, released today, saw annual headline inflation clock in at 2.1%, down from 2.4% in the previous quarter, while the all-important trimmed mean inflation landed at 2.7% annually, down from 2.9% in the March quarter. This is the lowest level since December 2021.
Importantly, key areas of concern for the RBA are tracking nicely.
Services inflation printed at 3.3% annually, down from 3.7% – the lowest since June 2022. This includes a notable slowing in rental price rises, which recorded a 4.5% rise annually. While this may seem high, it is down from an annual rate of 5.5% recorded in the previous quarter.
Similarly, insurances clocked in at 3.9%, down from 7.6%.
New dwelling inflation continued to head towards zero, with an annual inflation rate of 0.7%, down from 1.4% in the previous quarter and down from the peak in September 2022 of 20.7%.
The monthly CPI indicator recorded headline inflation below the target band at 1.9% annually, however, this was largely driven by volatile items such as petrol.
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| ABS Quarterly CPI – annual movement | ||
|---|---|---|
| Quarter | Headline inflation | Trimmed mean |
| Dec-22 | 7.8% | 6.8% |
| Mar-23 | 7.0% | 6.5% |
| Jun-23 | 6.0% | 5.8% |
| Sep-23 | 5.4% | 5.1% |
| Dec-23 | 4.1% | 4.2% |
| Mar-24 | 3.6% | 4.0% |
| Jun-24 | 3.8% | 4.0% |
| Sep-24 | 2.8% | 3.6% |
| Dec-24 | 2.4% | 3.2% |
| Mar-25 | 2.4% | 2.9% |
| Jun-25 | 2.1% | 2.7% |
Source: ABS Consumer Price Index, Australia, Quarterly CPI annual change (%).
RBA rate cut now firmly on the agenda at the next meeting
Today’s results deliver the key piece of data the RBA has been waiting for to consider a cash rate cut, with trimmed mean inflation, at an annual rate of 2.7%, confidently tracking towards the midpoint of the target band.
While this rate is a fraction above the RBA’s own forecasts set in May, of 2.6%, the RBA should still see this as sustainable progress.
The surprise increase in unemployment to 4.3% in June, is unlikely to have the RBA rattled, but it will add to the case for a cash rate cut, despite the fact it is just one month of data.
At the 8 July media conference, Governor Bullock said: “By our next meeting in five weeks, we will have the June quarter CPI, another labour market reading, further information about international developments and an updated set of forecasts. So the Board decided to wait a few weeks to confirm that we’re still on track to meet our inflation and employment objectives.”
What would a rate cut look like for borrowers?
An owner-occupier with a $600,000 debt today, and 25 years remaining on their loan could see their monthly repayments drop by $90 on the back of one 0.25 percentage point RBA cut, assuming the banks pass it on in full to existing variable rate borrowers.
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| Potential impact of an August RBA cash rate cut | ||
|---|---|---|
| New minimum monthly repayments | Difference | |
| $600,000 | $3,703 | -$90 |
| $750,000 | $4,628 | -$113 |
| $1,000,000 | $6,171 | -$150 |
Source: Canstar.com.au. Notes: based on an average variable owner-occupier paying principal and interest. Calculations assume a cut in August and that the banks pass it on in full to existing variable customers the month after.
Big banks expect cut in August but continue to differ on how many cuts are ahead
The big four banks are tipping a cash rate cut on 12 August, and today’s results all but lock in a move by the RBA to lower the rate to 3.60%.
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| Current big four bank cash rate forecasts | |||
|---|---|---|---|
| Next move | Total number of cuts to come | Cash rate at end of cutting cycle | |
| CBA | -0.25% in August | 2 | 3.35% |
| Westpac | -0.25% in August | 4 | 2.85% |
| NAB | -0.25% in August | 3 | 3.10% |
| ANZ | -0.25% in August | 2 | 3.35% |
Canstar’s data insights director, Sally Tindall says, “These results are the confirmation the RBA has been waiting for – inflation is back into the target band for the second quarter in a row and continuing to track towards the mid-point of 2.5 per cent, giving the RBA a clear runway to continue easing rates.”
“This, combined with the surprise lift in Australia’s unemployment rate, should be more than enough for the RBA to pull the trigger on the third cash rate cut for the year.
“Inflation is cooling in key categories that have been cause for concern for the central bank. Services inflation is still too high, at an annual rate of 3.3 per cent, but it’s now at the lowest level since June 2022.
“A key part of this is rental inflation, which also made a significant drop from an annual rate of 5.5 per cent in the previous quarter to 4.5 per cent this time around. There’s no question this is still way too high, with so many Australians struggling to find affordable housing, however, at least prices aren’t rising by as much.
“While an RBA cut looks to be a near-certainty, if you’ve got a mortgage, don’t bank on any extra cash until it lands in your bank account. The RBA has shown it doesn’t dance to the beat of market expectations — it’s the one steering the ship.
“Banks are also at the helm of your mortgage and while we expect the big banks to step up to the plate and pass the next cut on in full, there’s no guarantee every lender will do this.”
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This article was reviewed by our Finance Editor Jessica Pridmore before it was updated, as part of our fact-checking process.
