Australian inflation drops to 3.5% in July

• Annual inflation fell to 3.5% in the 12 months to July.
• Housing costs and fuel price rises drove the main inflationary pressures.
• Underlying inflation remained steady as the trimmed mean held at 3.6%.

Australia's consumer price index rose 3.5% in the 12 months to July, slowing down from a 3.8% annual rate recorded in June.

The result showed a deceleration in annual price growth, although persistent shelter costs kept broader living expenses elevated compared to the prior year.

"Housing rose by 5% in the 12 months to July due to rising costs for new dwellings," said ABS head of price statistics Rachael McCririck.

Higher prices for meals out and takeaway food pushed food inflation to 3.2%, while a 7.5% monthly jump in automotive fuel lifted annual transport inflation to 1.6%.

The central bank monitors these underlying price metrics closely to evaluate broader economic pressures ahead of its upcoming interest rate decisions.

Housing costs formed the largest overall contributor to the annual inflation figure, driven largely by builders passing along higher expenses for construction materials and labour.

Transport costs reversed their recent downward trend following higher global crude oil prices alongside the partial unwinding of federal fuel excise relief measures.