CPI indicator drops for 2nd month in a row

The monthly Consumer Price Indicator has clocked in at 3.5 per cent in the year to July, dropping from 3.8 per cent in June – the second monthly drop in a row.

Trimmed inflation, the RBA’s preferred measure, printed at 3.8 per cent in July (down from 4.1% in June), while CPI excluding volatile items and travel dropped to 3.7 per cent (from 4.0% in June).

Leading the charge was cheaper electricity, after the introduction of government rebates, which saw prices fall 5.1 per cent in the year to July, after rising 7.5 per cent in June.

ABS Consumer Price Index, Australia - annual movement

Source: ABS Consumer Price Index, Australia, Quarterly CPI and Monthly CPI indicator, annual change (%).

Borrowers need to take action

While today’s data is moving in the right direction, Governor Bullock has made it clear it is “premature to be thinking about rate cuts”. Borrowers will need to take measures into their own hands.

The RateCity database shows there are now over 60 lenders offering at least one fixed or variable home loan rate under 6 per cent.

For the average owner-occupier with a $500,000 loan balance, paying principal and interest repayments, switching to a rate under 6 per cent (5.99%) would decrease their monthly repayments by $351.

Over the next two years, they could save $9,928 in interest costs, assuming rates fall in line with ANZ’s cash rate forecast.   

Potential savings from refinancing to a rate under 6%

Based on a $500,000 loan with 25 years remaining

Source: RateCity.com.au. Notes: based on an owner-occupier paying principal and interest with 25 years remaining. Assumes mortgage rates move in line with ANZ's current cash rate forecast. Refinancing options includes an estimated $1250 in switch fees. Does not include ongoing fees.

RateCity.com.au money editor, Laine Gordon, said: “Australia is making good progress in the marathon that is tackling inflation, however, even with two consecutive monthly drops in prices, the race is not yet won.”

“The RBA isn’t going to take the foot off the pedal on the back of this data, but it should give the Board some confidence that inflation is moving in the right direction,” she said.

“Families shouldn’t just wait for the RBA or Government to give them a reprieve from inflation pressures, either in the form of a rate cut or bill relief, now is the time to look for other ways to take the pressure off.

“Borrowers hoping the RBA will cut the cash rate anytime soon should forget that, and instead focus on how they can get a rate cut for themselves by shopping around.  

“The RateCity database shows there are currently over 60 lenders with rates under 6 per cent, so if you have a variable loan and are paying more than that, now is the time to consider refinancing.

“A typical owner-occupier with a $500,000 loan, could potentially save $351 per month if they refinanced from the average rate to a sub-6 per cent loan. That’s a gift that keeps on giving,” she said.

Some of the lowest home loan rates on the RateCity.com.au database.

Source: RateCity.com.au. Note: rates are for owner-occupiers paying principal and interest. Deposit requirements apply. Australian Mutual Bank loan is for first home buyers.

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