Consumer prices rose at a slightly slower pace in May, with the latest figures from the Australian Bureau of Statistics showing annual inflation at 4.0 per cent, down from 4.2 per cent in April.
The Consumer Price Index increased by 0.7 per cent over the month, reflecting mixed movements across key spending categories. Housing remained the largest driver of annual price growth, rising 6.5 per cent over the year, followed by food and non-alcoholic beverages and transport, both up 3.3 per cent.
Rachael McCririck, head of prices statistics at the Australian Bureau of Statistics, said annual inflation had eased compared with the previous month. She pointed to continued strength in housing costs, particularly electricity, rents and new dwellings, as central contributors to price growth. Electricity prices were 21.1 per cent higher than a year earlier, which the bureau attributed in part to the end of government rebates that had previously reduced household bills.
Underlying inflation, measured by the trimmed mean, rose to 3.6 per cent over the year to May, up slightly from 3.4 per cent in April. The ABS noted that automotive fuel was excluded from the trimmed mean in recent months due to sharp price movements.
Fuel prices fell sharply again in May, down 11.9 per cent over the month following a 7.0 per cent fall in April. The bureau said the declines reflected the impact of the halving of the fuel excise from 1 April as well as softer global oil prices.
Transport inflation eased in annual terms, rising 3.3 per cent compared with a 6.6 per cent annual increase in April.
Treasurer Jim Chalmers said the data showed inflation had moderated again, describing the result as better than market expectations. He said headline inflation had now fallen for a second consecutive month, with monthly inflation down 0.7 per cent in May compared with a 0.4 per cent rise in April.
Chalmers said inflation pressures that initially emerged through fuel costs were now also appearing in areas such as dwelling construction, and noted that while inflation was easing, global uncertainty continued to influence price movements.
He pointed to government measures aimed at cost of living relief, including tax cuts, changes to social security indexation, and the extension and tapering of the fuel excise cut, which he said would help households manage ongoing price pressures.
Economist Stephen Koukoulas said the results did not point to any major shift in the inflation outlook. He said annual inflation easing to 4.0 per cent from 4.2 per cent was broadly expected, while the uptick in trimmed mean inflation suggested underlying pressures were still present. He added that weaker economic growth would likely be needed to bring inflation back towards target levels.
Despite the easing in headline figures, inflation remains above the Reserve Bank’s target band, with housing costs continuing to do much of the heavy lifting in overall price growth.
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