RBA Monitor: Status quo as RBA emphasizes data dependency to ensure inflation stabilization

After the Reserve Bank of Australia (RBA) eased in August, inflation has remained sticky. The headline CPI picked up to +3.0% YoY in August from +2.8% YoY in July. For sure, the main reason was the expiry of state government electricity rebates. However, the decline in trimmed mean, a measure of underlying inflation, was limited to +2.6% YoY from +2.7% YoY during the same period, which is higher than +2.1% YoY in June. Moreover, services inflation has remained elevated above +3.0% YoY.The reason behind the sticky services inflation has been the tight labor market. The unemployment rate was flat at 4.2% in August, which is still below the natural rate estimated between 4.5% and 5.0% by the Australian Treasury. In fact, nominal wage growth has remained elevated at +3.4% YoY in Q2-25.Furthermore, the Australian economy has begun to reveal early signs of stabilization. GDP growth surprised on the upside by increasing +0.6% QoQ in Q2-25, where private consumption made the largest contribution by expanding +0.9% QoQ. Still, the sustainability of this positive momentum is questionable. Household’s savings rate fell to 4.2% in Q2-25 from 5.2% in Q1-25, when real disposable income has stagnated over the past few years.