Inflation eased again in June, and economist Matt Bell says it changes the RBA’s next move. Here’s what SME owners need to know.
Inflation just surprised everyone, in a good way. Whether households are feeling that relief yet is a different question.
Oliver Hume Property Group’s Chief Economist, Matt Bell, says the latest Consumer Price Index figures suggest the pressure that’s been building on Australian businesses all year might finally be starting to ease. “Given all the global surprises encountered in the first half of 2026, it seems hard to believe that the underlying inflation pulse is easing, but that’s what today’s inflation release is telling us,” Bell said.
The numbers back him up. Headline inflation dropped to 3.8% in the year to June, down from 4.0% in May. That’s below the 4% economists were tipping. Underlying inflation, the measure the RBA watches most closely, stayed flat at 3.6%, again below the 3.7% consensus forecast. Zoom in on just the past six months and underlying inflation is actually tracking closer to 3.2%.
It’s a sharp turnaround from where things looked headed only recently. “Only a few months ago, expectations were for headline inflation to push to 6% and underlying by 4.5% by the end of the year,” Bell said.
This isn’t a one-off, either. Inflation has now come in softer than forecast for three months running.
What it means for a possible rate move
Financial markets have been going back and forth on whether the RBA has one more hike left in it, swinging from odds well below 50% to nearly a sure thing in the space of a month. Most economists surveyed in early July expected the RBA to hold its cash rate at 4.35% until the second half of 2027, when cuts would begin.
Before this release, markets had priced in a 78% chance of a 0.25% hike by year’s end, with a move fully priced in by March 2027. The odds of a hike at the August meeting had climbed to around 40% before easing back to roughly 25% ahead of today’s numbers.
Bell thinks this latest data tips the scales further. “Today’s inflation result probably shifts the balance back to a longer period of the RBA holding on rates before the next move down occurs sometime in the second half of 2027,” he said.
The cost-of-living reality
Not everyone is reading the headline figure as good news. Joel Gibson, Consumer Finance Expert at Zyft, says the 3.8% number simply confirms what households have been living through for months. “The June CPI figures will just put a number on what millions of households are living through every single day: there has been no respite, no breathing room, and the national belt-tightening exercise hasn’t stopped,” Gibson said. He points to housing, up 6.8% over the year, and food and non-alcoholic beverages, up 3.3%, as the two biggest contributors households simply can’t avoid.
It doesn’t stop there, Gibson said. Energy prices that were expected to fall in July instead rose again for many households, health insurance climbed around 4.5% in April, its steepest increase in years, and some NBN plans have gone up by as much as $120 a year. Fuel is next in line, with an extra 16 cents a litre in fuel tax landing in August, which Gibson estimates will add around $320 a year at the bowser for the average household.
Groceries are adding to the load too. Citing Canstar Blue data showing households spent $178 a week on groceries in August 2025, Gibson said the latest inflation figures point to roughly $6 more a week at the checkout, or about $305 over the coming year. Zyft’s own price tracking shows where that pressure is concentrated: since January, beef mince has risen 12.5%, butter 13.3%, and fresh two-litre milk by as much as 19.3% at Coles and Woolworths.
Mortgage holders haven’t been spared either. Gibson estimates this year’s three cash rate hikes have added around $272 a month to repayments on a $600,000 mortgage, or $3,265 over a year. Combined with rising groceries, energy and insurance, he puts the average household’s extra cost this year at around $4,110 compared to last.
Relief for borrowers, eventually
For businesses connected to residential property, construction, and household spending more broadly, a rate pause is still exactly what’s needed. Bell points out the market has already absorbed three hikes this year, in February, March and May, on top of ongoing uncertainty around the Federal Budget.
Small businesses have felt that squeeze directly. Dynamic Business reported on the May hike that took the cash rate to 4.35%, its third rise in 2026, noting business owners were already managing fuel cost surges and rising input prices at the same time. An earlier rate pause, covered by Dynamic Business back in late 2025, showed just how much SME growth plans hinge on where rates land next.
“The market is clearly cooling, and likely will be until the outlook for rates stabilises, even if that doesn’t mean cuts for potentially 12 months,” Bell said. Bell believes stability, not necessarily lower rates, is what will get buyers moving again. “Once purchasers can lock in their borrowing capacity and budgets with some degree of certainty, markets will start to stabilise.”
Gibson’s advice for households under pressure right now is less about cutting the obvious things and more about checking what’s easy to overlook. “It’s not about skipping your morning $5 coffee. It’s about taking five minutes to check your plan or switch providers, which can save you hundreds of dollars,” he said. He also points to a recent Federal Court ruling against misleading “Down Down” supermarket discounts as a reminder that shelf tags aren’t always what they seem, and that tools tracking real price histories can help shoppers spot genuine savings.
Between Bell’s cautious optimism on rates and Gibson’s numbers on household strain, the picture for the rest of 2026 is mixed. Inflation is cooling. Whether that translates to actual relief for households, and by extension the SMEs relying on their spending, is still an open question.
Keep up to date with our stories on LinkedIn, Twitter, Facebook and Instagram.
