Australia's inflation rate has hit 6.1 per cent – slightly less than forecast – but still a big hit to the cost of living.

The figure makes it less likely that the Reserve Bank (RBA) will raise the official cash rate by 75 basis points in August. But it's still expected to increase by 50 basis points.

Data released by the Bureau of Statistics (ABS) on Wednesday morning revealed the consumer price index (CPI) rose by 1.8 per cent in the June quarter, with the annual inflation rate increasing to 6.1 per cent.

It's the highest inflation rate since December 1990, when Bob Hawke was still prime minister.

The CPI previously rose by 2.1 per cent between the December 2021 and March 2022 quarter.

The current figure is substantially higher than the RBA's inflation target of 2-3 per cent, increasing the pressure to hike rates again.

Treasurer Jim Chalmers has described the inflation figures as "confronting", with the Prime Minister conceding that families are struggling with cost of living pressures.

"We face economic headwinds. We face rising inflation. We face rising interest rates. There are real challenges there, but I'm comfortable that my government has a plan to deal with those challenges,'' he said

Chalmers is expected to use Thursday's economic statement to parliament "to talk more about these challenges and how we are responding".

"Our economic plan is all about making the economy more resilient, lifting the speed limits on growth and giving Australians more opportunities to get ahead," he said.

Highest inflation rate in decades

The most significant contributors to the June quarter's CPI spike were new dwellings (up by 5.6 per cent) and petrol prices (4.2 per cent).

The price of goods (2.6 per cent) continued to rise faster than that of services (0.6 per cent).

There was a particularly large increase to food prices, driven by supply chain disruptions due to floods, labour shortages, and rising freight costs. Fruit and vegetable prices went up by a stunning 7.3 per cent.

Meat and seafood and bread were up 6.3 per cent year-on-year.

Non-discretionary items - expenditure you can't really avoid - went up by 7 per cent, increasing cost of living pressures on families further.

Furniture prices also rose by 7 per cent between March and June due to increased transport and material costs and stock shortages.

"The quarterly increase of 1.8 per cent was the second-highest since the introduction of the GST, following on from a 2.1 per cent increase last quarter," said Michelle Marquardt, Head of Prices Statistics at the ABS.

"Shortages of building supplies and labour, high freight costs and ongoing high levels of construction activity continued to contribute to price rises for newly built dwellings. Fewer grant payments made this quarter from the federal government's HomeBuilder program and similar state-based housing construction programs also contributed to the rise.

"The CPI's automotive fuel series reached a record level for the fourth consecutive quarter. Fuel prices rose strongly over May and June, following a fall in April due to the fuel excise cut."

Annual price inflation for new dwellings is currently the highest recorded "since the series commenced in 1999", Marquardt added.

The annual inflation rate is also the highest since the GST was introduced.

"Annual trimmed mean inflation was the highest since the series commenced in 2003 and annual goods inflation was the highest since 1987, as the impacts of supply disruptions, rising shipping costs and other global and domestic inflationary factors flowed through the economy," she said.

Slightly better than feared

Prior to today's ABS data, economists speculated that anything above 6.3 per cent could force the RBA to raise interest rates by a huge margin at its next meeting on Tuesday.

The figure came in lower than that, but not by much.

"A big upward surprise in today's Q2 CPI data for Australia could see the RBA move 75 (basis points) in August, though we think 50 (basis points) is more likely at this stage," ANZ analysts said.

"We have upgraded our inflation forecasts since we published our detailed preview, and now expect headline inflation to accelerate to 6.6 per cent year-over-year, and (have) trimmed mean inflation to 5.1 per cent year-over-year.

"We think the risks are more balanced for these stronger forecasts given ongoing upside inflation surprises globally."

ANZ is also reporting that spending fell 17 per cent in the week to July 24.

That's not unexpected given the increase in home loan interest rates. It's also not as dramatic as the 29 per cent fall last year when cases of the Delta Covid variant jumped.

"The July dip in ANZ-observed spending was a little sharper than in previous years once we take higher inflation into account, though still within the 'normal' range," analysts from the bank said on Wednesday.

"There's no cause for alarm yet, but we will be watching consumer spending closely in coming weeks to identify an interest-rate-led slowdown.

"Given our forecast of a further 200 basis point hike in the cash rate, we expect to see consumer spending growth slow down by year end."

Releasing the International Monetary Fund's July 2022 Economic Outlook on Tuesday, the body's Economic Counsellor and Director of Research, Pierre-Olivier Gourinchas, admitted that global forecasts had "darkened significantly since April".

Measuring growth, global gross domestic product (GDP) was forecast to slow from 6.1 per cent in 2021 to 3.2 per cent in 2022.

This was also 0.4 per cent lower than what was predicted in April's report.

"The world may soon be teetering on the edge of a global recession, only two years after the last one," Gourinchas said.

- Samantha Maiden, news.com.au