Continued low levels inflation levels will likely leave the Reserve Bank of Australia (RBA) with little choice around the future of the official cash interest rate when it meets next week.


Released this week, Consumer Price Index (CPI) data from the Australian Bureau of Statistics (ABS) revealed consumer prices climbed just 0.4% over the June quarter and 1% in the 12 months to June.


John Flavell, chief executive of Mortgage Choice, said the inflation readings, which are at historic lows, would provide the RBA with the incentive it needs to cut the cash rate at its board meeting on Tuesday.


“While these results were largely in line with market expectations, the yearly rise of 1.0% is incredibly low by historical standards,” Flavell said.

“This less than impressive inflation result will certainly provide the Reserve Bank with the incentive they need to cut the cash rate again this year,” he said.

The official cash rate currently sits at 1.75%, after the RBA announced a 0.25% cut after its May board meeting.


While the inflation reading may prove to be the trigger the RBA needs to lower the cash rate further, Flavell said the real interest for many people would be if lenders pass on any reduction to borrowers.


“Rates will more than likely fall lower this year. If and when this happens, all eyes will look to Australia’s lenders to see if they follow suit and pass on the rate cuts to their customers.”