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May’s latest consumer price index data reached its lowest point since October 2024, lending further support to additional rate cuts over 2025.
The latest Australian Bureau of Statistics (ABS) figures showed that the monthly consumer price index (CPI) indicator rose 2.1 per cent in the 12 months to May 2025.
ABS head of prices statistics, Michelle Marquardt, said that annual CPI inflation in May was down from 2.4 per cent in April, and reached its lowest point since October 2024.
The annual change in monthly CPI, excluding volatile items like fruit, vegetables, fuel and holiday travel, rose 2.7 per cent in the 12 months to May, compared to a 2.8 per cent rise in the 12 months to April.
“Annual trimmed mean inflation was 2.4 per cent in May 2025, down from 2.8 per cent in April. This is the lowest annual trimmed inflation rate since November 2021,” Marquardt said.
According to the data, the biggest drivers of the annual CPI increase were housing (+2 per cent), food and non-alcoholic beverages (+2.9 per cent), and alcohol and tobacco (+5.9 per cent).
The annual housing inflation rose by 2 per cent in May, which was down from 2.2 per cent in April.
While new dwelling prices rose 0.8 per cent over the year to May, this was down from the 1.2 per cent rise in the 12 months to April.
Marquardt said that the change marked the lowest annual growth since April 2021, which she attributed to home builders offering discounts and promotional offers to attract business.
Data showed that rents increased by 4.5 per cent over the 12 months to May, down from the 5 per cent growth recorded in April.
The ABS said the change was the lowest annual growth in rental prices since December 2022, mostly due to smaller rental increases and stabilising vacancy rates across most capital cities.
Real Estate Institute of Australia president, Leanne Pilkington, said that the figures aligned with the Reserve Bank of Australia’s expectations for further interest rate cuts over 2025.
“The CPI figures are consistent with the Reserve Bank of Australia’s expectations of inflation being in the 2–3 per cent target range throughout 2025 and support market expectations of further rate cuts during 2025, following the February and May cuts,” Pilkington said.
“Further cuts in interest rates can be expected during 2025, providing additional relief for borrowers,” she added.
Similarly, Domain’s chief of research and economics, Dr Nicola Powell, said the ABS’ most recent data supported the case for a July rate cut, which would provide a significant boost to the nation’s housing market.
“If the RBA moves as expected, it’ll be the third rate cut in this cycle – a much-needed boost for borrowers dealing with mortgage affordability,” Powell said.
“A lower cash rate will also lift borrowing power and could finally give first-home buyers a shot at entering the property market this year.”
While Powell noted that lower rates usually push property prices up, she said that property owners should still keep their growth expectations in check.
“Slower population growth, improved housing supply, and persistent affordability challenges are likely to keep a lid on sharp price gains,” she concluded.
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