BREAKING NEWSInflation FALLS within the Reserve Bank target – here’s why it’s way too soon to celebrate

Australia’s inflation rate has fallen within the Reserve Bank’s 2 to 3 per cent target for the first time in three years thanks to $300 energy rebates.

The consumer price index – or headline inflation – dropped to 2.7 per cent in August, a sharp fall from 3.5 per cent in July. 

This was the lowest monthly headline inflation rate since August 2021 when Sydney and Melbourne were still in lockdown.

The result was largely a result of the federal government’s $300 energy rebates that came into effect on July 1, along with generous state government electricity relief programs.

But Reserve Bank of Australia Governor Michele Bullock on Tuesday warning a big fall in headline inflation – which includes volatile items – would not lead to a rate cut in 2024.

‘That’s going to lower energy prices, fuel prices have also come down in recent months so, it could well be on current forecasts that the headline inflation rate in fact comes in – 12 month ended – below 3 per cent,’ she told reporters in Sydney.

‘That is important because it’s reflecting cost-of-living relief so it is reflected in the prices that people are seeing.

‘But it’s not really reflective of the underlying inflation pulse which is more, what are we observing happening with services really, which is the crux of the matter.’

The monthly inflation data from the Australian Bureau of Statistics showed underlying inflation, also known as the trimmed mean, rising by 3.4 per cent over the year. 

While headline inflation has fallen, underlying inflation without the volatile items is still well above the RBA’s 2 to 3 per cent target.