Drop in inflation announced just a day after interest rates stay on hold
Decreasing automotive fuel and energy prices have been major contributors to a falling inflation rate, but the RBA is advising caution
3 min
The rate of inflation has fallen to its lowest levels since August 2021, the Australian Bureau of Statistics revealed today. The news comes just a day after the Reserve Bank of Australia announced it would be keeping interest rates on hold at 4.35 percent.
The drop in the rate of inflation to 2.7 percent has been largely attributed to moderating prices of petrol and diesel, with automotive fuel 7.6 percent lower than a year ago, and electricity, which fell 17.9 percent over the same period.
Michelle Marquardt, head of Prices Statistics at Australian Bureau of Statistics, said the decrease in electricity prices was largely due to Commonwealth and State Government energy rebates in Queensland, Western Australia and Tasmania.
“Electricity fell 17.9 percent in the 12 months to August, which is the largest annual fall since the electricity series started in the early 1980s,” Ms Marquardt said. “Commonwealth Government and State Government rebates led to a 14.6 percent fall in electricity prices in the month of August, which followed a 6.4 percent fall in July.
“Excluding the rebates, electricity prices would have risen 0.1 percent in August and 0.9 per cent in July.”
The news was less positive for renters and those seeking to build or renovate, with rents up 6.8 percent over the past year and new dwelling prices also up by 5.1 percent.
Following a meeting of the RBA board yesterday, governor Michele Bullock announced that the cash rate would remain unchanged, citing persistently high inflation and economic uncertainties as major influences on the decision.
“Inflation has fallen substantially since the peak in 2022, as higher interest rates have been working to bring aggregate demand and supply closer towards balance,” Ms Bullock said in a statement. “But inflation is still some way above the midpoint of the 2–3 per cent target range.
“Headline inflation is expected to fall further temporarily, as a result of federal and state cost of living relief. However, our current forecasts do not see inflation returning sustainably to target until 2026. In year-ended terms, underlying inflation has been above the midpoint of the target for 11 consecutive quarters and has fallen very little over the past year.”
While the decision to keep rates on hold was widely anticipated, it has raised eyebrows in some quarters given the US Federal Reserve announced last week it was dropping the official cash rate by 50 basis points. However, research director at CoreLogic Asia Pacific, Tim Lawless, says there was good reason for keeping rates on hold in Australia for now.
“Importantly, Australia hasn’t gone ‘as hard’ on monetary policy as most other Western nations, increasing the cash rate by 425 basis points compared with a 525 basis point increase in the US and NZ, and a 515 basis point rise in the UK,” he said.
“Also, our tightening cycle has lagged most other nations, with the cash rate increasing from May 2022 compared with the US where the hiking cycle commenced in March 2022 or the UK where interest rates started rising in December 2021, or NZ and the EU which commenced rate hikes even earlier, in October and July 2021 respectively.”
Ms Bullock said the RBA board would be keeping a close on labour markets both here and overseas as it navigates a path to sustained lower inflation at the target rate of between 2 and 3 percent.
“Sustainably returning inflation to target within a reasonable timeframe remains the board’s highest priority,” she said. “This is consistent with the RBA’s mandate for price stability and full employment. To date, longer term inflation expectations have been consistent with the inflation target and it is important that this remain the case.
“While headline inflation will decline for a time, underlying inflation is more indicative of inflation momentum, and it remains too high.”
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The Federal Budget may have softened some of its proposed tax reforms, but it has exposed a bigger issue: too many families are relying on wealth structures that no longer reflect the realities of modern life.
3 min
For many Australians, the 2026 Federal Budget initially felt like a direct challenge to the way wealth is created, held and transferred between generations.
The headlines were immediate: changes to capital gains tax, reforms to discretionary trusts, restrictions on negative gearing and increased scrutiny of investment structures. Unsurprisingly, affluent families, business owners and investors began asking the same question:
Is the way we hold our wealth still fit for purpose?
In recent days, the government has announced several significant amendments following industry consultation and public feedback, including exempting testamentary trusts from the proposed 30 per cent minimum tax and expanding capital gains tax concessions for small businesses.
The backdown is welcome. But it also highlights something much bigger.
This Budget has accelerated a conversation that many Australian families have been postponing for years.
The conversation is not really about tax. It is about wealth stewardship.
For decades, Australians have built wealth through businesses, property, investments and careful long-term planning. Yet many families have not revisited the legal structures surrounding those assets in years, sometimes decades.
We often see clients who have spent years building significant wealth, only to discover their legal arrangements no longer reflect their current circumstances.
Their children are now adults. They may own multiple properties.
They may have sold a business, entered a second marriage, become grandparents or accumulated digital assets that did not exist when their original estate plans were prepared.
The trust that distributes income may need to be reconsidered. The bucket company may no longer be so attractive.
The Budget has simply exposed a reality that already existed: wealth structures cannot remain static while life continues to evolve.
Importantly, trusts themselves are not the issue.
Trusts are legitimate planning tools that provide flexibility, protection and continuity. When used appropriately, they allow families to adapt to changing circumstances over time.
And neither is tax the issue, really. Getting the fundamentals right is more important for long-term, sustainable wealth than a few favourable tax treatments around the edges.
The real issue is complacency.
Too often, families create structures and assume the job is done. It isn’t.
Estate planning is no longer a document you sign once and file away in a drawer. It is an ongoing process that should evolve alongside your life.
We are also seeing a broader shift in how Australians define wealth itself. It is no longer just the family home and an investment portfolio.
Modern wealth includes businesses, digital assets, cryptocurrency, intellectual property, frequent flyer points and increasingly complex family arrangements.
At the same time, Australians are living longer than ever before, meaning wealth may need to support multiple generations simultaneously. This creates new responsibilities and new risks.
How do you help your children enter the property market without exposing family wealth to relationship breakdowns?
How do you structure wealth so that it remains a source of opportunity rather than future conflict?
These are the questions families should be asking now.
The recent debate surrounding testamentary trusts also serves as an important reminder that policy decisions can have unintended consequences for vulnerable Australians. It is encouraging that the government has listened to feedback and clarified its position.
But the lesson remains: the wealth landscape is changing.
Increasingly, governments, regulators and tax authorities are paying closer attention to how wealth is held and transferred. That means families cannot afford to adopt a “set-and-forget” approach to their structures.
The families who will be best placed for the future are not necessarily those with the greatest wealth.
They are the families with the greatest clarity. Clarity around ownership, succession and governance. And clarity around how wealth will transition from one generation to the next.
Ultimately, preserving wealth is not about avoiding change.
It is about preparing for it.
Because the greatest risk is not change itself.
It is losing the ability to respond to it.
Anthony Hunt is Co-Founder of Wealth Lawyers and former COO of Westpac Private Bank. He advises business owners, investors and affluent Australian families on wealth protection, succession planning and intergenerational wealth transfer
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