Reduced inflationary concerns and the United States central bank signalling rate cuts bodes well for Australian borrowers - and the federal government - keen to avoid a hike.
The June quarter inflation print largely diffused talk of further increases to the official interest rate when the Reserve Bank of Australia meets next week.
The annual rate of headline inflation accelerated in June - rising to 3.8 per cent, up from 3.6 per cent - but this was broadly in line with expectations when it was released on Wednesday.
The all-important trimmed mean gauge came in a little below expectations, allaying fears underlying inflation was gathering pace.
Treasurer Jim Chalmers was keen to stamp his government's efforts on the progress logged on core inflation, including back-to-back surpluses.
"The combination of our surpluses and the design of our cost‑of‑living relief means that we are helping rather than hampering the fight against inflation," he told ABC radio on Thursday.
But he warned the "last mile" to bring inflation down was difficult, in Australia and elsewhere, with the eurozone's consumer price index ticking a little higher overnight, against expectations.
The US Federal Reserve keeping interest rates on hold and signalling cuts at the next meeting in September was a more promising global development, Dr Chalmers said.
Shadow treasurer Angus Taylor kept up his attack on the government's economic management, accusing Labor of allowing spending to grow faster than the economy.
The shadow treasurer said the government was failing to tame inflation and that meant interest rates would stay higher for longer.
"Whatever the Reserve Bank does next week, what's very clear is that the pain will continue for Australians for a lot longer," he told 2GB on Thursday.
With an election on the horizon, the government wants to see cuts as soon as possible to give mortgage-holders and businesses relief.
Westpac chief economist Luci Ellis said disinflation was on track, with Wednesday's release supporting the bank's forecasts of rates staying on hold until cuts start in November.
"Another quarter of inflation data should be enough to convince the RBA board that disinflation is on track and that inflation will be back into the target range on the desired timetable," she said.
Traders were more optimistic about the rates profile, with hike bets abandoned and the chance of a rate cut almost fully priced in by February 2025.
Official figures on Wednesday showed a rise in retail trade, while stronger-than-expected, was largely fuelled by price-conscious consumers taking advantage of end-of-year sales.
Still, a snap-shot of the small business sector pointed to rates-fuelled pain, with the cost of borrowing high and financially-stretched customers spending less.
Australian Small Business and Family Enterprise Ombudsman Bruce Billson said small business owners were worried they may not be able to ride out the tough economic climate.
With firms largely preoccupied with keeping their doors open, business transformation had taken a back seat, the first Small Business Pulse showed.
Firms were less likely to hire staff, advertise, expand their offerings, or dive into other forms of innovation.
