"Today's inflation data shows that the impacts of increasing global trade disruptions are beginning to flow through to the Australian economy," said Innes Willox, Chief Executive of national employer association the Australian Industry Group.
Headline CPI declined from 2.4% to 2.1% p.a. in the June quarter of 2025, a fall below market expectations and RBA forecasts. However, since early 2025 the driver of disinflation has shifted from a domestic to international base, largely driven by cheaper imports becoming available as a result of the disruption to global trade flows.
Inflation for traded goods fell to 0.2% p.a. in the June quarter – outside of the pandemic its lowest reading in eight years. Inflation for non-traded goods eased only marginally to 3.1% p.a., and has been flat since the start of the year. This is evidence that the Australian economy is now primarily 'importing' its lower inflation via lower price rises for traded goods.
"The data now shows something that has long been expected – that US tariffs, and their knock-on effects, would eventually hit the Australian economy. As tariffs have reduced access to the US market, displaced exports – particularly from our region – have had to find alternate outlets, putting downward pressure on prices for affected goods. China is our biggest import market.
"While it is welcome that this has helped lower inflation in Australia, it also poses difficulties for our trade-exposed industries. Local businesses which compete with imports have very limited ability to pass on rising costs in the current environment.
"The data also reveals that domestic-origin inflation remains too high, with no progress in lowering non-tradable prices growth this year. High wages growth, a very tight labour market, and rising energy and regulatory costs continue to pose a challenge for industry and the economy at large.
"This is ultimately a symptom of Australia's weak productivity performance – absent of meaningful productivity uplifts, rising business costs will be passed on to consumers and stoke inflation. Without productivity gains at home, we will rely on the global economy and cheap imports to manage inflation for us.
"This points to the urgent need for immediate reforms which will turn Australia's productivity performance at the Treasurer's upcoming Economic Reform Roundtable," Mr Willox said.
