The RBA bases cash rate decisions on a thorough assessment of the Australian economy. Six key indicators—CPI inflation, core inflation, unemployment, GDP growth, home prices, and wage growth—are especially influential. Although the Board also considers global conditions, household debt, and financial stability, these six metrics most directly indicate the likely direction for rates.
Economic Highlights
- Overall inflation surged to 3.8%, showing a clear upward trend from last year.
- GDP growth slowed to 0.4%, yet unemployment holds steady at 4.1%.
- Australian house prices continue to climb sharply, now averaging over one million dollars.
Inflation (CPI)
Consumer Price Index measuring changes in the cost of living. Both headline and core (trimmed mean) inflation are measured monthly, comparing to the same month last year.
Headline Inflation (YoY)
6 Months Ago
Core Inflation - Trimmed Mean (YoY)
6 Months Ago
Headline Inflation Trend (Monthly)
Core Inflation Trend (Monthly)
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Key Takeaway
The big takeaway is the contrast between the steady annual inflation and the clear slowdown in monthly price increases. It hints that while inflation is elevated, some recent heat is starting to dissipate.
What's Happening
Inflation, measured by CPI, is holding steady at 3.8% year-over-year. That's up from 2.4% a year ago and 3.4% six months back. While the annual rate is firm, the monthly momentum actually softened quite a bit, dropping from a 1% jump to just 0.4% this past month.
Impact on Borrowing
Sticky inflation numbers usually signal central banks won't be in a hurry to cut rates. It keeps pressure on them to maintain a tighter stance, affecting borrowing costs.
Unemployment Rate
The unemployment rate tells us the percentage of people who are actively looking for work but can't find a job. It's a key snapshot of the health of the labor market.
Current Value
Quarterly Change
fell to a lower level
Same Time Last Year
July 2025
12-Month Trend
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Key Takeaway
It looks like the job market is holding steady and strong, which is a positive sign for overall economic resilience. People are finding jobs, and that's always good news.
What's Happening
The unemployment rate just ticked down slightly to 4.075%, a small improvement from last month. We've seen a noticeable drop from the 4.3% range a few months back. It's even a hair lower than where we were a year ago, which is pretty stable.
Impact on Borrowing
A healthy labor market, like this, often suggests the economy can handle higher rates. However, a stable rate isn't pushing the Federal Reserve to hike aggressively, meaning borrowing costs might stay put for now.
GDP Growth
This number tells us the yearly percentage change in our country's total economic output. Think of it as how much bigger or smaller the whole economy got.
Current Value
12-Month Trend
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Key Takeaway
This stability in growth, while not spectacular, points to an economy that's coping. It's a sign of a steady ship, not necessarily speeding up, but definitely not sinking either.
What's Happening
We're seeing 0.8% growth year-over-year, which is a little better than 0.6% a year ago. It’s consistent with six months ago, after a small dip last quarter. So, we're holding steady, showing some resilience.
Impact on Borrowing
Such moderate growth probably means interest rates won't see dramatic changes. It lessens the urgency for the central bank to either cut aggressively or consider hiking, keeping borrowing costs relatively stable.
Home Prices
This indicator simply tells us the average selling price of homes over the past year. It gives a good sense of how much residential property costs across the market.
Current Value
Quarterly Change
rose by 2.7%
Same Time Last Year
June 2024
12-Month Trend
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Key Takeaway
The sustained increase really highlights strong demand in the housing market. Despite potential rate hikes, people are clearly still willing to pay more for homes, suggesting underlying confidence.
What's Happening
Dwelling prices have definitely been on a climb lately. We're seeing a notable year-over-year jump to 1074.7, significantly up from 890.9 a year ago. Even looking back six months, prices have steadily increased from 1029.9 to where they are now. It's a consistent upward trend.
Impact on Borrowing
Rising home prices can put upward pressure on interest rates. Central banks might see this as a sign of overheating, possibly leading to higher borrowing costs to cool things down.
Wage Growth
This index tracks how much wages are growing across the economy, not including bonuses or overtime. It gives us a pure look at salary increases.
Current Value
Quarterly Change
rose to a higher level
Same Time Last Year
June 2024
12-Month Trend
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Key Takeaway
This stability, especially compared to last year, suggests that wage growth might be settling down. It’s a good sign that things aren't spiraling out of control on the pay front, which helps manage overall inflation.
What's Happening
It's holding pretty steady at 3.4% right now, which is exactly where it was six months ago. We did see a small dip to 3.3% in September, but it's bounced back. Interestingly, it's softer than the 3.7% we were tracking a year ago.
Impact on Borrowing
If wages aren't pushing up too quickly, that's good news for inflation. It might mean central banks can take a breather, potentially easing pressure on interest rates and borrowing costs for us all.
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Frequently Asked Questions
The RBA Board meets 8 times per year (roughly every 6 weeks) to review economic data and make cash rate decisions. However, they continuously monitor economic indicators between meetings to assess emerging trends.
