Australia's inflation trends and Reserve Bank rate hike expectations in June 2026
Consensus Summary
Australia’s inflation data for May 2026 showed a mixed picture, with headline inflation easing to 4% from 4.2% in April, driven by a 12% drop in fuel prices. However, underlying inflation—measured by the trimmed mean—rose to 3.6%, its highest level since late 2024, signaling persistent price pressures. Economists and the Reserve Bank of Australia (RBA) remain concerned about inflationary trends, particularly in home building costs (up 5.6% annually) and food prices (3.3% annually). While financial markets slightly increased the probability of a rate hike in August to 32%, the RBA’s focus on underlying inflation suggests further tightening could still occur. The global energy shock and supply chain disruptions are expected to keep inflation elevated in the coming months, though some economists argue the case for further hikes is less compelling given the slower economic growth.
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Key details reported by multiple sources:
- Australia’s annual headline inflation dropped to 4% in May 2026 (year-to-May), down from 4.2% in April 2026 (year-to-April).
- The Reserve Bank of Australia’s preferred trimmed mean measure of underlying inflation rose to 3.6% in May 2026 (year-to-May), up from 3.4% in April 2026 (year-to-April).
- The ABS reported a 0.9% increase in home building costs in May 2026, lifting the annual pace to 5.6%.
- Food and drink inflation accelerated to 3.3% in May 2026 (year-to-May), up from 2.8% in April 2026 (year-to-April).
- The probability of an RBA rate hike on 11 August 2026 was at 32%, while the chance of a hike by the end of 2026 remained at 56%, according to financial markets.
- The RBA has warned that inflation will trend higher in coming months due to the fallout from the global energy shock affecting fuel prices and supply chains.
Points of Difference
Details reported by only one source:
- The Bureau of Statistics noted that underlying inflation is now running at its highest annual pace since the September quarter of 2024.
- The fallout from the global energy shock is working its way through Australia's economy, according to ABC News reporter Sharon Gordon.
- Treasurer Jim Chalmers welcomed the lower headline inflation rate but said his government was not 'complacent' about inflation risks.
- Sally Auld, NAB’s chief economist, predicted the next move in rates would be a cut, though mortgage relief would not arrive for another year.
- Shane Oliver, AMP’s chief economist, said the RBA was worried about not acting soon enough to prevent a high inflation psychology taking hold, citing higher fertiliser prices as a concern.
Contradictions
Conflicting information between sources:
- The Guardian states that the consensus forecast for May 2026 inflation was 4.4%, but the ABC does not mention this specific forecast.
Source Articles
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Despite plunging fuel prices, trimmed mean inflation increased from an annual pace of 3.4% to 3.6% Australia’s inflation challenge is far from over and more Reserve Bank rate hikes remain on the cards, economists warn, even after a plunging petrol costs drove an unexpected fall in consumer price growth in the year to May. Annual inflation dropped to 4%, from 4.2% in the year to April, according to the Australian Bureau of Statistics, dragged down in large part thanks to a nearly 12% drop in fuel
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