Australia's annual Consumer Price Index (CPI) has eased to 2.4% as of January 2026, placing it comfortably within the RBA's 2–3% target band for the first time since mid-2021. The decline from peak inflation of 7.8% in December 2022 has been one of the sharper disinflation episodes in the developed world.
The good news
Goods inflation has largely returned to normal. Supply chains have recovered, shipping costs have fallen, and global commodity prices have stabilised. The prices of many consumer goods — electronics, clothing, furniture — are flat or falling in real terms. This normalisation has been the primary driver of the headline CPI decline.
Where prices are still rising
Services inflation remains elevated at 4–5%, well above the target band and the main reason the RBA isn't ready to cut. The biggest contributors: rents (up 6–8%, driven by record-low vacancy rates), insurance (premiums surging 10–15% as reinsurance costs and natural disaster claims compound), dining and hospitality (up 5–6%, reflecting higher wages and input costs), and education and childcare (up 4–5%). Groceries and energy, while off their peaks, remain elevated compared to pre-pandemic levels — the cumulative price increase since 2020 means cost-of-living pressures persist even as annual growth slows.
Until services inflation breaks below 3%, the RBA is unlikely to pivot to cuts — making the March quarter CPI print (due late April) the most consequential data release of the year.