Bleak forecast could spell more cost-of-living pain for Aussies

Published: 22:22, 23 June 2026 | Updated: 22:22, 23 June 2026 A lot is riding on upcoming inflation numbers as they help dictate the direction of the next interest rate decision. If consumer price data comes in softer than expected on Wednesday, it could signal inflation is on track to undershoot the Reserve Bank's forecast for June, potentially spelling an end to the central bank's interest rate hiking cycle. AMP chief economist Shane Oliver is tipping the Australian Bureau of Statistics to show headline inflation fell 0.4 per cent in May, mainly due to a 15 per cent fall in fuel prices. But because of an even steeper decline in inflation a year earlier, the annual figure would still rise from 4.2 per cent to 4.3 per cent. However, the RBA will pay closer attention to the trimmed mean, a measure of underlying inflation, which excludes volatile items such as petrol. Dr Oliver expects the annual trimmed mean to rise from 3.4 to 3.5 per cent - well above the RBA's two to three per cent target band. HSBC chief economist Paul Bloxham said the RBA would have an 'uncomfortable choice' between fighting inflation and keeping the economy running smoothly.  'Our view is that the downswing began in March and is already clear in a range of indicators,' Mr Bloxham said. If consumer price data comes in softer than expected on Wednesday, it could signal inflation is on track to undershoot the Reserve Bank's forecast for June (pictured, RBA governor Michele Bullock) 'The only question has been how big the downturn will be and what would drive it.' Even though fuel prices had come down since the initial oil spike, higher input costs were still being passed on by businesses, Dr Oliver said. 'You're seeing the second-round effects from the March rise in oil prices, so the fuel levies flow on to various building materials and plastics and so on,' he told AAP. The RBA will be keeping a close eye on housing costs, which are weighted heavily in the consumer price basket and will indicate how quickly businesses are passing on fuel costs. The cost of building a new home is expected to keep rising strongly. NAB senior economist Taylor Nugent has pencilled in a monthly increase of 0.8 per cent. Because fuel prices have fallen faster than expected by the RBA and most other forecasters, headline inflation was tracking comfortably below the central bank's pick of a 4.8 per cent annual rise in the June quarter, Mr Nugent said. But oil prices were still higher than February and underlying inflation was still on the way up. The extent to which firms were passing on higher costs to consumers will be key. AMP chief economist Shane Oliver is tipping the Australian Bureau of Statistics to show headline inflation fell 0.4 per cent in May, mainly because of a 15 per cent fall in fuel prices (stock image) If the trimmed mean came in below the consensus bet of 3.5 per cent annually for May, that could put downward pressure on the RBA's June quarter forecast, Dr Oliver said. 'A lot is riding on the numbers out tomorrow because most forecasters, including ourselves, will then have two months' worth of data, which gives you a fair stab at estimating how the trimmed mean will have behaved in the quarter as a whole,' he said. Fuel prices are set to fall even further in June, given the benchmark Brent oil price has dipped to about $US77 a barrel after a shaky ceasefire between the US and Iran lifted hopes that the Strait of Hormuz will open up to more oil tankers. But even as more ships sail through the vital waterway, its future remains uncertain and global supplies remain well below pre-war levels. On top of this, the government's fuel excise reduction will be halved to 16c a litre from July 1 before expiring at the start of August. So even if the oil price stays at current levels throughout July, it will be almost entirely offset by the rise in the excise, Dr Oliver said. No comments have so far been submitted. Why not be the first to send us your thoughts, or debate this issue live on our message boards. By posting your comment you agree to our house rules. Do you want to automatically post your MailOnline comments to your Facebook Timeline? Your comment will be posted to MailOnline as usual. Do you want to automatically post your MailOnline comments to your Facebook Timeline? Your comment will be posted to MailOnline as usual We will automatically post your comment and a link to the news story to your Facebook timeline at the same time it is posted on MailOnline. To do this we will link your MailOnline account with your Facebook account. We’ll ask you to confirm this for your first post to Facebook. You can choose on each post whether you would like it to be posted to Facebook. Your details from Facebook will be used to provide you with tailored content, marketing and ads in line with our Privacy Policy.