Australia’s Inflation Softens: Moderation Holds but Housing and Energy Risks Build

Australia’s inflation eased marginally in February 2026, with the Consumer Price Index rising 3.7% over the year to February, slightly lower than the 3.8% recorded in January. The trimmed-mean measure of core inflation remained unchanged at 3.3%, while the monthly CPI was flat in original terms and increased by 0.2% on a seasonally adjusted basis.

From a broader perspective, the CPI trend (Exhibit 1) highlights a steady moderation from the 2022 peak above 7%. Both headline inflation (red line) and trimmed-mean core (yellow bars) have largely stabilized within the 3–4% range across 2025–26. February’s reading reinforces this gradual cooling trend, although near-term pressures could still push headline inflation higher before any further easing takes hold.

A closer look at the CPI Groups table (Exhibit 2) shows that underlying drivers remain uneven. Housing continued to be the primary contributor, adding 1.55 percentage points to annual inflation—its most significant recent impact—supported by a 7.2% yearly increase driven by rents and construction costs. Food and non-alcoholic beverages contributed 0.54 points (3.1% annually), while Recreation and culture added 0.50 points (4.1% annually). In contrast, Transport provided slight relief, subtracting 0.02 points as fuel prices declined. The table’s heat map underscores housing’s sustained strength through late 2025 and early 2026, standing in contrast to softer or negative contributions from Transport and Recreation in recent months.