Inflation rate tops 4% – worst in more than two years

If petrol and diesel prices had not changed, the CPI would have risen by 2.9% over the year.

Economists had largely anticipated the rise, although it is higher than the 3.9% forecast by the Reserve Bank.

Other contributors to the annual CPI increase were:

electricity – up 12% (8.4% contribution to the 4.1% annual inflation rate)local authority rates and payments – up 8.8% (6.7% contribution)construction of new housing – up 2.7% (6.4% contribution).

Westpac senior economist Satish Ranchhod believed the reading wouldn’t come as a major surprise to the Reserve Bank, as the reading was largely higher due to volatile items like holiday accommodation.

“Overall, today’s result wasn’t as worrying as it could have been, with limited signs of widespread spillover from high oil prices. But inflation is still high,” Ranchhod said.

“We think that [Official Cash Rate] hikes are most likely at the Reserve Bank’s September and December policy meetings.”

Looking at how the CPI changed quarter-on-quarter, it was up 1.5% in the June 2026 quarter, compared with the March 2026 quarter.

Higher petrol prices were the largest contributor to the quarterly inflation rate, up 20.1%. Diesel prices also increased, up 47.7%.

“Together, petrol and diesel accounted for almost two-thirds of the 1.5% quarterly increase,” Growden said.

Excluding the effect of petrol and diesel, the CPI rose 0.5% in the June 2026 quarter.

Tradeable inflation measures final goods and services that are influenced by foreign markets.

Within the 4.9% increase in tradeable inflation in the 12 months to the June 2026 quarter, higher prices were recorded for:

petrol, up 27.5% (46.4% contribution to the 4.9% rise for all groups tradeable)other vehicle fuels and lubricants, up 71% (15.1%) contribution to all groups tradeable).

Lower prices were recorded for:

oils and fats, down 9.1% (-1.7% contribution to all groups tradeable)audio-visual equipment, down 18.4% (-1.4% contribution to all groups tradeable).

Non-tradeable inflation measures final goods and services that do not face foreign competition and is an indicator of domestic demand and supply conditions. However, the inputs of these goods and services can be influenced by foreign competition.

Within the 3.4% increase in non-tradeable inflation in the 12 months to the June 2026 quarter, higher prices were recorded for:

electricity, up 12% (17% contribution to the 3.4% rise for all groups non-tradeable)local authority rates, up 8.8% (13.6% contribution to all groups non-tradeable).

Lower prices were recorded for:

milk, cheese and eggs, down 9% (-1.7% contribution to all groups non-tradeable)real estate services, down 4.6% (-1.5% contribution to all groups non-tradeable).

More to come …

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