Underlying inflation is the one that economists (and the RBA look at).

It’s the inflation rate when you take out the volatile stuff from the CPI basket – the stuff that moves in price (the biggest increases and the biggest falls) – they just get what is happening in the middle.

The main reason the RBA cares about it is because historically – let’s say a cyclone causes the CPI to increase, then they aren’t going to react on a one-off or a volatile price increase. So it’s meant to be a safeguard.

But somewhere along the way, it has become the main measure the RBA says it is targeting. Which is part of the reason the central bank has been so tardy in cutting rates. Inflation is at 2.4% (which is in the target band of between 2-3%) while underlying inflation is at 3.2%. So the bank has been looking at the second measure, hence the delay.