The all-important quarterly Consumer Price Index data shows a considerable slowing in inflation to 0.2% in the September quarter, compared with 1% in the June quarter.

It brings the annual CPI inflation rate to September 2024 to 2.8%, significantly down on the 3.8% rise in the 12 months to June 2024.

The quarterly drop reflects the federal government’s energy rebate, effectively cutting power costs for all Australian households, as well as additional state energy subsidies in Queensland, Western Australia, and Tasmania.

Overall, electricity prices fell 17.3% in the September quarter and 15.8% over the past 12 months.

The September CPI figures also covered the government’s stage three tax cuts which effectively put more money back into the consumers' pockets but appear not to have added to inflationary pressures as some commentators had feared.

Where inflation is still biting

The quarterly figures show a considerable drop in goods inflation, down to 1.4% in the September quarter compared to 3.2% in June.

This was due to significant falls in electricity and automotive fuel prices, the Australian Bureau of Statistics (ABS) said.

But annual services inflation came higher than the previous quarter at 4.6% in the September quarter - up 0.1% - reflecting higher prices for rents, insurance, education, medical, dental, and hospital services.

Rent, food prices up

Rental costs also rose 6.7% over the 12 months to September but that was down from 7.3% at the end of the June quarter. 

Changes to Commonwealth Rent Assistance helped take the edge off the real rise in rents, the ABS said.

Food costs also increased by 3.3% in the year to September, driven largely by higher fruit and vegetable prices.

Underlying inflation also slows

While it looks like good news for people with a mortgage holding out for a rates cut, the Reserve Bank of Australia (RBA) is more concerned with underlying inflation, a measure that removes items with volatile pricing changes.

Wednesday’s data shows trimmed mean inflation has come in at 3.5%, a drop on the 3.9% figure recorded in the June quarter.

It indicates inflation is heading in the right direction but it’s unlikely to spur a cut in the cash rate when the RBA board meets on Monday and Tuesday next week.

RBA governor Michele Bullock has repeatedly told Australians there will be “no rate cut until the board is confident that inflation is moving sustainably towards the 2-3% target band”.

By ‘inflation’, Ms Bullock means the trimmed mean figure which, at 3.5%, is certainly moving towards the target band but is not yet within it.

Equity markets have the likelihood of a rate cut on Melbourne Cup Day at just 10%.

The quarterly trimmed mean figure of 3.5% has also come in above the Commonwealth Bank's prediction of 3.4% which is likely to see Australia's biggest bank ditch its forecast of an interest rate cut in December.

CommBank had been the outlier among its big four peers who are all expecting the RBA to cut the cash rate in February 2025.

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