The politics of falling inflation has been clear – lower is better. But Australia should beware its flip side: slow growth
Guardian1 day
Australia's Inflation Drops to 2.1%, Lowest Since 2021
Above: A customer shops for groceries at a supermarket in Canberra, Australia, on May 29, 2025. Image copyright: Zhang Na/Xinhua/Getty Images
The Spin
Narrative A
The inflation data provides clear justification for the RBA to cut rates at its August meeting. With core inflation now sitting comfortably within the target range and unemployment rising to 4.3%, the central bank must now act to spur growth by lowering rates. The broad-based cooling in price pressures across goods, services and housing removes any concerns about keeping rates restrictively high.
Narrative B
The RBA's cautious approach in July proved wise given the concerns regarding the durability of the deflation Australia is seeing at this point in time. While the numbers support easing, the central bank's preference for a measured approach suggests they won't rush into aggressive cuts, especially since inflation remained sticky for several key metrics used by the bank for their calculations.