Cheaper fuel cools inflation, but power bills still bite

Fuel did the heavy lifting

Australian households received some relief at the bowser in June, with fuel prices down 10.9% in the month, according to the latest Australian Bureau of Statistics (ABS) data.

Lower fuel prices were the main reason headline inflation cooled, subtracting 0.4 percentage points from monthly inflation.

Overall, annual headline inflation has fallen from 4.0% in May to 3.8% in June. On a quarterly basis, headline CPI slowed to 0.6% in the June quarter from 1.4% in the previous quarter.

CommBank Senior Economist Trent Saunders said the CPI print provided "further evidence that underlying inflation pressures are gradually easing". 

The relief was not spread evenly with electricity prices up 22% in a year

Despite the overall reduction in inflation, not every part of the household budget is easing. 

Saunders said housing inflation, which includes housing related costs like electricity, rent and dwelling construction costs, was up 0.5% in June, with the annual rate rising to 6.8%.

Electricity prices remain a primary contributor to inflation – they rose 1.8% after seasonal adjustment and are now up 22.4% since last year. 

Rents rose 0.3% before seasonal adjustment, while the annual rate stayed at 3.6%.

Saunders said rental costs were still being lifted by "tight rental markets and low vacancy rates continuing to support firm increases". 

Meals out and takeaway food also remained a source of pressure, with prices up 4.0% over the year.

What it means for interest rates

For borrowers and savers, the rate outlook remains the main question. Saunders said the June data supported CommBank’s view that the RBA will keep rates on hold through the rest of 2026.

"Overall, today's data support our view that the RBA will remain on hold through the rest of 2026," Saunders said.

CommBank expects annual trimmed mean inflation to reach the top of the RBA’s 2-3 per cent target band by the June quarter of 2027, before moving slowly towards the midpoint by the start of 2028.

Saunders said the outlook still depended on domestic activity slowing further and on global energy and input costs. The note said the expiry of temporary fuel relief, renewed pressure on oil prices and the conflict in Iran could lift fuel’s contribution to inflation in the September quarter.

This article is based on Trent Saunders economic note: “June 2026 CPI: 0.8%/qtr trimmed mean, Economic Insights, Global Economic & Markets Research” first published on 29 July 2026.