Capacity constraints remain binding. Demand is too strong. And without changes to fiscal and structural policy, interest rates will remain the primary lever — regardless of the political cost.

The consumer price index was the last major piece of data before the Reserve Bank meeting on Melbourne Cup day.

It also flagged that wage growth has eased from its peak, productivity remains weak, and the timing and size of policy lags are hard to pin down

Benign quarterly inflation figures from the Australian Bureau of Statistics – showing headline inflation at 2.1% and underlying inflation at 2.7%

According to the RBA’s analysis, these measures would save both businesses and consumers a combined $1.2 billion every year.

Businesses report that weak demand limits their ability to pass on cost increases, and labour market indicators remain mixed

Inflation has fallen within the Reserve Bank’s target range for the first time since 2021.

While wage pressures have eased more than anticipated, productivity growth has not improved, resulting in high unit labour costs.

Since it peaked at 7.8% in December 2022, inflation has now fallen for seven out of eight quarters.

The rate in the September quarter dropped to 2.8%, putting it for the first time within the Reserve Bank’s target range of two-point-something since the March quarter of 2020.