The Reserve Bank of Australia wants you to believe inflation is under control. But here’s the truth: That number is misleading; every time you pay rent, buy groceries or renew your insurance, it’s getting more expensive and you’re not imagining it.
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The RBA points to a trimmed mean inflation rate of 2.7% for the June quarter, which is technically inside their 2–3% target band.
But let’s be real: That number is not the full story. It’s a version of inflation that filters out the biggest price moves, removing the most volatile items to give a “cleaner” average. Let’s break down what that really means.
The trimmed mean is a version of inflation that cuts out the biggest price rises and falls, essentially filtering out “volatile” items to give what economists call a “core” reading. Sounds smart in theory, but in practice, it’s misleading.
For example, if electricity jumps 20% and airfares drop 10% both get excluded, making inflation look calm, even though your bills are rising. Now here’s where it gets worse. The RBA is widely expected to cut interest rates in August, possibly bringing the cash rate down to 3.6%. That might sound like relief, but it adds fuel to the fire. Why?
Because housing makes up nearly 22% of the CPI basket. Lower rates could reignite property demand, push prices up and drag inflation up with it.
The very thing that’s supposedly “under control” could be turbocharged by the policy meant to ease it. Meanwhile, the Employee Living Cost Index, which captures household pressure by including mortgage and rent payments, is still running hot. So, what does this mean for your portfolio?
There’s now a massive disconnect between the official inflation numbers and what we are experiencing. But in that disconnect lies opportunity for investors who can see through the noise. When inflation stays sticky and the RBA starts easing, certain sectors historically benefit.
So, here are three sectors and six stocks to keep an eye on:
1. Finance Sector
Inflation and monetary easing can boost profit margins for insurers and reignite lending demand, such as QBE Insurance (ASX: QBE), where higher insurance premiums and rising costs can improve underwriting margins.
And for Commonwealth Bank (ASX: CBA), lower rates could fuel more property lending, helping offset margin compression.
2. Consumer Staples
In tough times, shoppers cut back but not on essentials; instead, they look for value, such as Woolworths (ASX: WOW), whose dominant market position and strong pricing power make it a reliable inflation hedge.
Metcash (ASX: MTS) supplies lower-cost independent stores like IGA, which makes it well placed to benefit from consumers looking for value.
3. Real Estate (REITs & Developers)
Lower rates and rising home prices can support capital gains and income from real estate plays like BWP Trust (ASX: BWP), which includes long leases with Bunnings to provide defensive income and strong tenant backing.
Another is Cedar Woods Properties (ASX: CWP), which is a well-positioned developer with exposure to land and housing ready to ride a property rebound.
So, what’s the bottom line?
Inflation isn’t dead, it’s just wearing a disguise, and while the Reserve Bank celebrates these numbers, real-world costs keep marching higher.
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But instead of fearing it, savvy investors are using this disconnect to their advantage because periods of sticky inflation and interest rate cuts create a powerful setup, one that rewards those who act early.
For now, good luck and good trading.
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Disclaimer: While Wealth Within holds an Australian Financial Services License (AFSL:226347), the information featured in this program is general in nature and therefore should not be relied upon. Before making any investment decisions, you should consult a licensed professional who can advise whether your investment decisions are appropriate for you.
Dale Gillham is Chief Analyst at Wealth Within and international bestselling author of How to Beat the Managed Funds by 20%. He is also the author of Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in bookstores and online at www.wealthwithin.com.au.
The material provided in this article is for information only and should not be treated as investment advice. Viewers are encouraged to conduct their own research and consult with a certified financial advisor before making any investment decisions. For full disclaimer information, please click here.