A key indicator of cost-of-living pressures, inflation tracks the rate of change in the prices of goods and services purchased by Australian households.
The Australian Bureau of Statistics, calculates the Consumer Price Index - or CPI every quarter, with details on the headline inflation.
It also records the underlying inflation, which excludes items with really volatile price movements like electricity.
In the 12 months to June, headline inflation rose slightly to 3.8 per cent, from 3.6 per cent.
This is still far above the target range set by the Reserve Bank of between two and three per cent.
Comparing the June quarter with the previous one in March, the C-P-I rose 1 per cent.
The Bureau of Statistics attributes the rise to: housing costs, food and non-alcoholic beverages, and clothing and footwear prices.
The headline inflation was in line with the forecasts of economists, but the surprise came in the data on underlying inflation or trimmed mean inflation
Shane Oliver is the chief economist at AMP.
"If you focus on a thing called the trimmed mean. It's running at 3.9 per cent. A little bit less than economists were expecting. Most economists were expecting around 4 per cent. So it's actually come down. It was 4 per cent, but now it has come down to 3.9 per cent. So it looks like those underlying pressures are edging down it to trend down a little bit. That's still to high. We still have a long way to go. But at least it is not as high as many had feared. There was a fear that it could be well over 4 per cent - and that might have justified another rate hike."
The Bureau of Statistics says it is the sixth quarter in a row of lower annual trimmed mean inflation.
This is the direction the Reserve Bank wants, even if it is happening slower than what many would like.
The data will be considered carefully in next week's interest rate decision when the Reserve Bank board meet on Monday and Tuesday.
The cash rate remains unchanged since November at 4.35 per cent, but the central bank says it will raise interest rates if inflation is not on track to reach the target range of between two and three per cent by the end of 2025.
Mr Oliver says the latest data on underlying inflation does reduce the likelihood of an interest rate rise next week.
"The Australian Money Market, of the Futures Market, which is how markets are pricing interest rate expectations. After the inflation figures a couple of months ago - that had gone up as high as the 70 per cent chance of another hike. Prior to today's inflation figures - that had fallen to a 23 per cent chance of another hike. Right now, any hike is being priced out completely. In fact, the market is starting to focus on interest rate cuts. And now forecasting the first cut to come in February next year. Whereas before today's numbers, they were not looking for a cut until May next year. So the money market is getting less keen on a rate hike. They've now given up on that one altogether. And it looks to me like the next move will be down. We will see the Reserve Bank stay on hold. It is still going to sound tough. But ultimately, we will follow with rate cuts, as we go into early next year."
Treasurer Jim Chalmers says he is pleased to see underlying inflation trending downwards, and he would like to see it come down even faster.
"Inflation in our economy is more persistent than any of us would like, but it is much lower than the more than 6 per cent inflation that we inherited when we were elected a little over two years ago. When we came to office inflation had a six in front of it. And now it has a three in front of it. But it is also important how we have designed the substantial, meaningful but responsible cost-of-living relief that is rolling out right now. Every tax payer is getting a tax cut. Every household is getting energy bill relief. There is cheaper medicines. And there is more rent assistance on the way as well."
Dr Domenique Meyrick, the co-CEO of Financial Counselling Australia, says there has been an increase in clients seeking their services in recent months.
"This year, since January, we have had 90,000 people making contact with the National Debt helpline. So if it continues at that rate, that would be a 15 per cent increase on last year. And on the Small Business Debt helpline, June this year was our busiest month ever since the service started. And we were supporting about 21 small businesses a day to try and tackle their debt problems."
She says housing remains a huge source of financial hardship for many Australians.
"People will prioritise those housing costs. So if they're calling in struggling to pay for housing, they will also be struggling to pay for energy bills. They will be struggling to pay for their telephone, for their internet. And then to meet those everyday costs of daily life like their groceries, or their petrol. So what is happening is that people are experiencing pressure from all different directions, at the same time."
The Australian Industry Group represents thousands of businesses across Australia.
CEO Innes Willox says inflation remains too high and that's a concern for employers negotiating wage agreements and commercial contracts.
RBA governor Michele Bullock has in the past defended the decision by the central bank in choosing not to raise interest rates as aggressively as other countries; but has said managing inflation remains the key challenge.
Mr Oliver says compared to other countries, inflation in Australia is on the higher end.
But he says looking globally, there are signs inflation is trending down - and we're likely to see bigger movements in that direction here in Australia.
"What is interesting here is that earlier this year through January, February, March. US inflation was pretty hot. It surprised on the upside. Guess what happened in Australia? We saw something similar in the June quarter - a bit higher than we want it to be. But US inflation is now starting to fall again. So just as US inflation is falling, I think that is probably a good pointer to the way it is going to go in Australia as well. So yes we are on the high side - that is why the RBA is sounding a bit more hawkish. A bit more worried about inflation than other central banks. But the likelihood is that we will follow other country's inflation rates down."
The RBA decision on interest rates will be announced on Tuesday 6 August.
