Annual inflation rose to 2.8 per cent in July, the highest it’s been since mid-2024, according to new figures released by the Australian Bureau of Statistics. A sharp jump in electricity prices, driven in part by the temporary end of energy rebates in some states, was a major reason behind the uptick.
Michelle Marquardt, head of prices statistics at the ABS, said the data marked a clear shift after several months of easing. “The 2.8 per cent annual CPI inflation to July was up from 1.9 per cent to June. This is the highest annual inflation rate since July 2024, following several months of easing inflation,” she said.
Housing costs, food and non-alcoholic beverages, and alcohol and tobacco were the biggest contributors. Housing was up 3.6 per cent, food and non-alcoholic beverages rose 3.0 per cent, and alcohol and tobacco climbed 6.5 per cent.
Electricity prices rose 13.1 per cent over the year, a reversal from the 6.3 per cent drop seen in June. Month-on-month, the rise was almost identical, with electricity costs up 13.0 per cent. The ABS pointed to two reasons: households in New South Wales and the ACT did not receive Energy Bill Relief Fund rebates in July, pushing their out-of-pocket costs higher, and the July price reviews kicked in across the country.
“Comparing the indexes for electricity with and without the impact of the Energy Bill Relief Fund shows that, for July, costs excluding the rebate effect rose 4.8 per cent. With the rebate impact, the rise was 13.0 per cent,” Ms Marquardt said.
Rents were up 3.9 per cent over the year to July, a slight dip from 4.2 per cent in June. The ABS noted this is the slowest annual rent growth since November 2022, reflecting relatively steady vacancy rates in most capital cities.
New home prices remained subdued, increasing just 0.4 per cent over the year, unchanged from the month before. “Annual growth in new dwelling prices remains low reflecting a subdued new home market,” Ms Marquardt said.
The cost of holiday travel and accommodation rose 3.3 per cent over the year to July, reversing a fall in the 12 months to June. School holidays played a role, with demand pushing up airfares and hotel prices by 4.7 per cent for the month.
Food prices continue to track at about 3 per cent annually, though some specific categories stood out. “While annual inflation eased for some food categories in July, coffee, tea and cocoa prices continued to rise, up 14.4 per cent in the past 12 months,” Ms Marquardt said. Poor weather overseas has disrupted key coffee-growing regions, leading to shortages and higher prices.
Other measures of inflation tell a similar story. The trimmed mean, which strips out large spikes and dips in specific categories, was 2.7 per cent in the year to July, up from 2.1 per cent in June. CPI excluding volatile items and holiday travel was 3.2 per cent over the year, up from 2.5 per cent the previous month.
Treasurer Jim Chalmers responded to the figures by pointing out that while the monthly rise is real, the broader picture remains stable. “This is the eighth month in a row that headline and underlying inflation have come in below three per cent,” he said.
“Volatile and one-off factors including the end of state energy rebates, travel prices and fuel were behind the increase in today’s results.”
Dr Chalmers urged caution in reading too much into the monthly CPI release, which he described as less reliable than quarterly figures. “The official quarterly numbers show that both underlying and headline inflation are at their lowest rates in almost four years.”
He framed the overall trend as one of strong progress since Labor came to office. “Inflation has more than halved since we came to office. Headline inflation was 2.8 per cent through the year to July 2025, much lower than the 6.1 per cent we inherited. Annual trimmed mean inflation was 2.7 per cent through the year to July 2025, much lower than what we inherited.”
Chalmers pointed to other economic markers released this month. “Today’s data comes after a run of welcome news in the economy this month—from another interest rate cut to falling unemployment, the strongest real wage growth in five years and the gender pay gap at a record low.”
He also made the case that government relief measures were having a real effect. “Today’s figures show the Albanese Government’s responsible cost-of-living relief measures are making a meaningful difference in easing pressure on Australians. Rents rose 3.9 per cent through the year but would have risen 5.1 per cent without the recent increases to Commonwealth Rent Assistance.”
Still, he acknowledged the job isn’t done. “We’ve made a lot of progress in our economy in the past few years, but the job’s not done because people are still under pressure.”
For the Reserve Bank, which has now cut interest rates three times in six months, the challenge remains weighing short-term inflation spikes against longer-term disinflationary trends. Electricity and housing pressures may linger in the months ahead, especially with rebates staggered and reviewed. But for now, inflation is sitting inside the Bank’s target band, even with energy costs pulling in the other direction.
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