The monthly Consumer Price Index (CPI) indicator has dropped from 2.5 per cent to 2.4 per cent in February 2025, new data from the Australian Bureau of Statistics (ABS) revealed.
ABS head of prices statistics Michelle Marquardt said the recent slip comes after the indicator held steady at 2.5 per cent for the last two months.
The largest contributors to the annual movement were food and non-alcoholic beverages (up 3.1 per cent), alcohol and tobacco (up 6.7 per cent), and housing (up 1.8 per cent).
Clothing and footwear also contributed to the annual movement, with CPI up 1.8 per cent in February 2025 from the same month last year. This follows a 2.1 per cent lift in January and a 1.8 per cent lift in December 2024.
According to the ABS, when prices for some items change significantly, measures of underlying inflation (like the annual trimmed mean and CPI excluding volatile items and holiday travel) can give more insights into how inflation is trending.
Marquardt said the annual trimmed mean inflation was 2.7 per cent in February, down from 2.8 per cent in January. She added it has remained relatively stable for three months.
“The CPI excluding volatile items and holiday travel measure rose 2.7 per cent in the 12 months to February, compared to a 2.9 per cent rise in the 12 months to January,” she said.
The latest slip in overall inflation has led some economists to expect a small interest rate cut in May.
CreditorWatch chief economist Ivan Colhoun said slower price increases for most of the categories most affected by COVID continues – “think insurance, rents, new housing costs, travel” – but noted this doesn’t mean the overall cost of living has improved or fallen, just that it’s rising at a slower pace.
“The need for larger cuts isn’t particularly there at present, with the Government playing a strong supporting role for growth with fiscal policy in the budget released overnight, though it remains to be seen how much of the policy promises are enacted as this will depend on the May election outcome,” Colhoun said.
“The scale and breadth of [US President] Donald Trump’s tariffs will hopefully become clearer on April 2. Directly, these won’t be large for the Australian economy, but will affect a number of industries.
“The risk is indirect if there are large broad-based tariffs and reciprocal tariff action on Australia’s Asian trading partners and on Europe.”
Among non-discretionary goods, annual inflation for food and non-alcoholic beverages was 3.1 per cent in February compared to 3.3 per cent in January, reflecting a softening in annual inflation across a number of grocery items.
Annual housing inflation was 1.8 per cent in February, which fell from 2.1 per cent in January.
Rents rose 5.5 per cent in the 12 months to February, following a 5.8 per cent rise in the 12 months to January. This is the lowest annual growth in rental prices since March 2023, consistent with rising vacancy rates across most capital cities.
New dwelling price rises slowed to 1.6 per cent in the 12 months to February, following a 2.0 per cent rise in the 12 months to January. This is the lowest annual rise in new dwelling prices since May 2021 as project home builders offered discounts and promotional offers to entice business.
The drop in annual housing inflation in February was driven by a fall in electricity prices due to the timing of payments of the Commonwealth Energy Bill Relief Fund rebates to households in Victoria.
Electricity rebates lower the price of electricity for households. In Victoria, payments of the third instalment of the Commonwealth Energy Bill Relief Fund rebate began from 13 January 2025. As a result, some Victorian households that did not receive a rebate payment in January will instead receive two rebate payments with their next bill in April.
All households billed in February received the third instalment of the Commonwealth Energy Bill Relief Fund rebate. Overall, national average electricity prices fell 2.5 per cent in the month of February.
“Electricity prices fell 13.2 per cent in the 12 months to February, compared to an 11.5 per cent annual fall to January. Excluding all Commonwealth and State government rebates, electricity prices would have fallen 1.2 per cent in the 12 months to February,” Marquardt said.
Automotive fuel prices fell 5.5 per cent in the 12 months to February, following a 1.9 per cent fall to January. In monthly terms, fuel prices rose 1.2 per cent in February.