The July monthly CPI result was further good news of mortgage holders, with inflation continuing to surprise on the downside. 

Annual growth in headline CPI inflation eased to 4.9 per cent, or comfortably below the market's expectation of 5.2 per cent.

Annual trimmed mean inflation also fell notably, to 5.6 per cent from 6.0 per cent in June.

Looking through the detail, important contributions to the decline in inflation came from food, household goods and services, fuel and travel. Indeed, annual inflation in holiday travel and accommodation fell from a blistering 12.9 per cent in June to a less extortionate 5.3 per cent in July.

Less comforting, annual inflation failed to fall in the housing, health and education sectors.

Annual housing inflation is running at just over 7 per cent, whereas annual inflation in the health and education sectors is running at just over 5 per cent. Housing shortages are pushing up rents, while labour shortages and rising wage costs are likely contributing to ongoing health and education inflation.

All that said, the overall continued decline in inflation further cements the case for the RBA leaving interest rates unchanged at its policy meeting next week.

My base case remains that the RBA has now concluded raising interest rates. It will remain on hold for the remainder of this year with the first interest rate cut now expected in April 2024, with two further rate cuts pencilled in over the remainder of next year.

As I've previously argued, provided overall inflation keeps moderating, Australia may not need to suffer an extended period of below trend growth or even a so-called "per capita recession".

The unemployment rate consistent with inflation returning to target could be much less than the 4.5 per cent rate currently assumed by the RBA.