New data from the Australian Bureau of Statistics (ABS) show that the consumer price index growth has eased in February 2026, but economists are not shouting for joy just yet.
ABS head of prices statistics Sue-Ellen Luke said the 3.7 per cent lift eased slightly from the 3.8 per cent annual CPI inflation to January 2026.
The largest contributor to annual inflation in February was housing, which rose by 7.2 per cent. This was followed by a 3.1 per cent rise in food and non-alcoholic beverages and a 4.1 per cent rise in recreation and culture, as well as a 4.9 per cent lift in clothing and footwear.
KPMG chief economist Dr Brendan Rynne said these figures might seem like a glimmer of hope, but it unfortunately bears little significance.
“The oil crisis shock ricocheting through the economy right now is expected to reverse the meagre gains achieved in February, with the impact of the fuel crisis not factored into the latest data,” Dr Rynne said.
“The potential impacts of the Middle East conflict are already translating to higher oil prices, which are now beginning to have a flow-on effect through the entire economy. Cost of food, transport, and construction materials are also set to rise, and governments across the globe are grappling with how to deal with national security and resilience risks that have been exposed by the conflict.”
When prices for some items change significantly, such as automotive fuel, measures of underlying inflation like the trimmed mean can give more insights into how inflation is trending.
According to Luke at the ABS, trimmed mean inflation was 3.3 per cent in the 12 months to February 2026, unchanged from the 12 months to January 2026.
Across the data, housing inflation was 7.2 per cent to February, up from 6.8 per cent to January. This reflects rising costs for electricity, new dwellings and rents.
Annual clothing and footwear CPI was up 4.9 per cent in February in seasonally adjusted terms, which is similar to 5 per cent in original terms. Between January and February, clothing and footwear inflation rose 2.6 per cent in original terms, and just 0.3 per cent in seasonally adjusted terms.
Electricity costs rose 37.0 per cent in the 12 months to February, up from 32.2 per cent in January. The increase in electricity costs over the year is mostly related to households using up the extended Commonwealth Energy Bill Relief Fund (EBRF) and various State Government rebates. The higher increase in the year to February compared to January reflects the ending of the EBRF rebates.
Excluding the impact of both the Commonwealth and State Government electricity rebates over the previous year, electricity prices rose 4.9 per cent in the 12 months to February. This reflects annual price reviews by energy retailers in July 2025.
Food and non-alcoholic beverages rose 3.1 per cent in the 12 months to February. “Annual inflation for food remains above three per cent,” Luke said. “Meals out and takeaway prices increased 3.7 per cent over the past year, and prices for both beef and lamb were 13 per cent higher compared to 12 months ago.”
Transport fell 0.2 per cent in the 12 months to February, with automotive fuel prices 7.2 per cent lower compared to 12 months ago. Prior to the Middle East conflict, luke said automotive fuel prices fell 3.4 per cent in the month of February, which followed a fall of 3.2 per cent in January.
KPMG’s Dr Rynne said next month’s CPI data will provide a better indication of where the RBA could be heading with interest rates. He said that while the oil crisis is set to intensify over the next few weeks, it’s not expected to give the RBA much comfort in its inflation fight.
“It is worth noting, though, that the headline rate of inflation produced by the ABS continues to show a divergence between actual pricing pressure faced across the economy and the statistical calculation of inflation that is still being impacted by previous energy rebates provided by Commonwealth and State Governments,” Dr Rynne said.
“KPMG’s no-rebate headline CPI series shows annual inflation fell over the month from 3.23% to 3.15%, about half of the fall identified by the ABS headline inflation series that incorporates the electricity rebates.”