Australia's headline inflation rate has been falling — but that headline number conceals enormous variation across the components of the Consumer Price Index. Understanding which categories are still running hot, which have already normalised, and which might actually be deflationary is essential for forming a view on where overall inflation is headed.

What Is Still Hot

Services inflation remains sticky. Insurance premiums have risen sharply — driven by increased claims costs, reinsurance price rises, and climate-related risk repricing — and are unlikely to moderate quickly. Rents, as discussed elsewhere, reflect structural supply shortages and continue to run well above the RBA's comfort zone. Healthcare costs have also remained elevated, partly reflecting indexation arrangements and the cost of a post-pandemic backlog of procedures.

What Has Normalised

Goods inflation has collapsed back toward pre-pandemic levels. Global supply chains have largely healed, shipping costs have normalised, and the inventory glut that followed the pandemic's demand surge has been worked through. New vehicle prices, electronics, and clothing are all showing material disinflation. Fuel prices, always volatile, are currently providing some downward pressure following the easing in global oil markets.

The Trimmed Mean

The RBA focuses on "trimmed mean" inflation — a measure that excludes the most volatile price movements in each direction — to get a cleaner reading of underlying price pressure. This measure has been falling more slowly than headline CPI, which is why the RBA held rates higher for longer than many market participants expected. The trimmed mean is the number to watch: its return to the 2–3 per cent target band is the key condition for sustained monetary policy easing.