July Inflation Eased to 3.5%, but Housing Costs Rose 5.0%

Short summary

Australia's Consumer Price Index rose 3.5% over the year to July 2026, down from 3.8% in June, according to the Australian Bureau of Statistics release published on 26 August.

Housing remained the largest contributor among the major CPI groups. The housing group rose 5.0% over the year, including new dwellings at 5.7%, rents at 3.6% and electricity at 6.1%.

These are price movements in an index, not the increase in every household's bills. The release did not change a mortgage rate, rent agreement, construction quote or RealEstateCalc formula.

Use the Inflation Calculator to test a constant inflation scenario. Read the Housing CPI glossary entry before treating the housing group as a house-price or mortgage-cost measure.

What changed in July

The headline annual rate eased, but the ABS measure of underlying inflation did not.

The annual rate compares July 2026 with July 2025. The monthly rate compares July with June. They answer different questions and should not be placed in the same series without a clear label.

The Trimmed Mean Inflation glossary entry explains why headline and underlying measures can move differently.

The housing components

The annual housing group result slowed from 6.8% in June to 5.0% in July. That does not mean housing became 1.8% cheaper. It means the index was 5.0% above its July 2025 level, compared with the previous month's 6.8% annual comparison.

Electricity prices fell 1.6% in July itself while remaining 6.1% higher over the year. This is another reason to keep monthly and annual figures separate.

What Housing CPI includes and excludes

The housing group measures price change for new dwellings bought by owner occupiers, rents, major renovations, maintenance and repairs, property rates and charges, and utilities.

It does not measure:

• the sale price of established homes;
• the value of residential land;
• mortgage interest charges;
• the repayment on a particular loan;
• investor purchase prices; or
• the cost of living for one specific household.

The ABS excludes established home transactions because they usually occur between households. Land is treated as investment rather than consumption. Mortgage interest is handled in the Selected Living Cost Indexes, which serve a different purpose.

Read Does Australian CPI Include House Prices or Mortgage Interest? for the method and common interpretation mistakes.

A worked inflation scenario

Assume a household wants to test how a $4,000 monthly spending amount would change if it rose at a constant annual rate of 3.5% for one year.

$4,000 x 1.035 = $4,140 a month

The indicative difference is $140 a month.

This is a scenario, not a forecast or a reconstruction of the CPI. A real household's rent, electricity, food, insurance and other costs change at different rates and at different times. Applying the national CPI rate to every item can hide those differences.

For a current budget, change each known bill from the actual notice or statement. Use a general inflation rate only for items where a separate assumption is useful, and label it clearly.

Does the release change mortgage repayments?

No. A CPI release does not change a loan contract or scheduled repayment by itself.

The Reserve Bank considers inflation with employment, demand, financial conditions and other information when setting monetary policy. The RBA's next decision is separate from the ABS release. Lenders separately decide how and when to change retail rates.

Use the Mortgage Repayment Calculator with the rate shown by the lender. Use the Rate Change Impact Calculator to compare an assumed movement without presenting it as a prediction.

What remains uncertain

• One monthly release does not determine the next RBA decision.
• Rebate timing can create large movements in electricity comparisons.
• CPI covers price change across the eight capital cities and does not reproduce one regional or household budget.
• A 3.5% national CPI result does not mean every price rose by 3.5%.
• The housing group is not a residential property price index.
• Construction quotes, rents and mortgage costs need current property or contract-specific evidence.

The next monthly CPI release, covering August 2026, is scheduled for 30 September 2026. The ABS says release dates can change, so check its calendar before relying on the date.

Sources

• ABS: Consumer Price Index, Australia, July 2026, released 26 August 2026 and checked 28 August 2026.
• ABS: Housing in the CPI and Selected Living Cost Indexes, including housing inclusions and exclusions. Checked 28 August 2026.
• RBA: Inflation overview, including the July 2026 headline rate, monthly CPI frequency and inflation target. Checked 28 August 2026.

General information disclaimer

This article provides general information about an official price index and indicative scenarios. It is not financial advice, credit advice, a rent forecast, a property valuation, a construction quote, an interest-rate prediction or a recommendation. Actual household costs, rents, loan rates and repayments vary. Check current ABS, RBA, lender and contract information before relying on an amount.

Last updated: 28 August 2026.