The year-on-year growth in prices across clothing and footwear is surging ahead of headline inflation.
The overall Consumer Price Index (CPI) rose 4.0 per cent in the 12 months to May 2026, with Australian Bureau of Statistics (ABS) data showing the fashion industry is ahead by 1 full percentage point – or up 5 per cent.
The leading driver of inflation is housing, up 6.5 per cent, with food and non-alcoholic beverages up 3.3 per cent, adding more pressure to overall inflation than fashion given industry sizes.
The food and beverage market is valued at around US$150 billion (~A$218 billion), while the fashion industry is valued at A$28 billion, footwear and jewellery at around $5 billion each, and other accessories bringing in another few billion dollars – all according to various market research firms.
In seasonally adjusted terms, clothing and footwear inflation grew 5.2 per cent, but was down by 0.7 per cent between April and May.
Price growth across clothing and footwear appears to be slowing from a recent peak in March, when it was up 7.1 per cent in original terms year-on-year.
Clothing and footwear’s annual inflation surge was driven by accessories (up 15.5 per cent) and garments for women (up 4.1 per cent).
According to the ABS, when prices for some items change significantly, measures of underlying inflation like the trimmed mean can give more insights into how inflation is trending.
For example, automotive fuel was excluded from the trimmed mean in March, April and May 2026.
ABS head of prices statistics Rachael McCririck said trimmed mean annual inflation was 3.6 per cent in the 12 months to May 2026, up from 3.4 per cent in the 12 months to April 2026.
Economists believe this is a clear signal that another rate hike from the Reserve Bank of Australia is on the cards.
KPMG chief economist Dr Brendan Rynne said there are two figures specifically that he and his team look at, with the most critical being core inflation.
“Frustratingly, we are seeing this rise, which will give the RBA the justification it needs to increase rates, most likely in August,” Dr Rynne said.
“Beyond that, it’s difficult to predict what will happen but at least one more rise is guaranteed.”
Dr Rynne said a higher cash rate is a two-edged sword. According to the chief economist, KPMG analysis shows that another 0.25 per cent increase will keep the exchange rate stronger and, in turn, lower core inflation.
“However, what matters more to core inflation is the strength of the labour market, and with a persistently low unemployment rate core inflation will take longer to fall. This is the challenge for the RBA’s narrow path mantra.
“We are set for incredibly weak growth for the rest of the year of just 0.3 per cent and 0.2 per cent for both the September and December quarters. That means annual real growth of just 1 per cent by the end of the year.
“There is no doubt this is anaemic growth – so while we are not forecasting a recession, the average Australian will certainly feel like they’re in one.”
Across the key drivers, housing’s inflation jump of 6.5 per cent in the 12 months to May reflects rising costs for electricity, new dwellings and rents.
McCririck said electricity costs are 21.1 per cent higher than 12 months ago as Commonwealth and State government rebates that reduced electricity costs for households are no longer in place.
Annual inflation for food and non-alcoholic beverages was 3.3 per cent, up from 2.8 per cent in April. Food inflation was driven by higher prices for meals out and takeaway, which rose by 4 per cent in the 12 months to May 2026.
“Price growth for transport eased from what we saw in April, rising 3.3 per cent in annual terms, down from a 6.6 per cent rise in the 12 months to April 2026,” McCririck said.
“On a monthly basis, Automotive fuel prices fell 11.9 per cent in May, after falling by 7.0 per cent in April.
“These monthly falls include the impacts of the halving of the fuel excise on 1 April and lower world oil prices in recent weeks.”