Further to last month’s CPIdecreaseto 4.2 per cent in the year until April 2026, today’s (24 June) rate in the year to May 2026 is fairly expected, but unlikely to provide much comfort given the persistent cost of living.
The largest contribution to annual inflation in May came from housing, which rose by 6.5 per cent, with a 3.3 per cent rise in food and non-alcoholic beverages, and a 3.3 per cent rise in transport.
With the CPI rising from 3.7 per cent in February to 4.6 per cent in March, a slight cooling trend is now emerging.
As recentlyreported, the RBA held the cash rate for the first time this year, on the back of three consecutive hikes, holding at 4.35 per cent. Experts are expecting the decrease will likely result in another RBA hold or increase.
BDO chief economist Anders Magnusson predicts the RBA will tighten policy further in August.
The increase in underlying inflation, he said, “reflects a shift from an initial energy-driven shock to broader and more troubling price pressures across the economy”.
“This is consistent with the pattern seen in previous supply-driven shocks, where headline inflation rises first, followed by a more persistent increase in underlying inflation as businesses pass on higher costs. That dynamic is now clearly playing out, and it marks a more concerning phase of the inflation cycle.”
However, Magnusson also noted that the economy continues to lose momentum as the labour market cools, but not enough to offset rising cost pressures, meaning households and businesses will face ongoing pressure.
Partner at Deloitte Access Economics, Stephen Smith, expects underlying inflation to continue rising over the coming months, with expected impacts on households.
He said: “Inflation is no longer surging, but it is still eroding purchasing power. Until price growth slows more convincingly, cost-of-living pressure will remain real, and the risk of another rate hike will remain firmly on the table.”
“While the fragile peace agreement in the Middle East is a welcome development, the disruption to global energy and logistics markets is unlikely to unwind quickly.”
In the same vein, he noted that the RBA must remain vigilant with “underlying inflation now above the 2.5 per cent target for almost five years”.
According to Employment Hero APAC managing director, James Keene, today’s figures will not reassure small business owners, with “cost pressures, a shifting tax landscape and ongoing rate uncertainty all weighing on confidence”.
With casual employment continuing to be the biggest driver of the labour market, according to EY’s most recent Jobs Report Data. “hours worked by casuals fell quarter on quarter, which may indicate that flexibility is coming at the cost of stability for some workers”.
The cumulative weight of these pressures, Keene continued, “is making it harder for small businesses to invest, hire and plan with confidence”.
“For the sake of small businesses heading into the new financial year, we hope the Reserve Bank takes the full picture into account in next month’s decision”.
Want to see more stories from trusted news sources?Make Accounting Times a preferred news source on Google.Click here to add Accounting Times as a preferred news source.
