Retail Price Index (RPI) Explained: 2025 Guide for Australians

The Retail Price Index (RPI) may not make daily headlines, but it quietly shapes the financial reality for millions of Australians. With inflation a hot topic and new economic policies rolling out in 2025, understanding the RPI is more crucial than ever—whether you’re a homebuyer, investor, or simply looking to make smarter budget decisions.

What Is the Retail Price Index (RPI)?

The RPI is a measure of the change in the cost of a basket of retail goods and services over time. Traditionally used to track inflation and guide wage negotiations, RPI covers a wide range of everyday expenses—think groceries, fuel, rent, transport, and utility bills. While the Consumer Price Index (CPI) is more commonly referenced in Australia, RPI remains influential for certain contracts, pensions, and historical comparisons.

• Basket of Goods: RPI tracks a representative sample of goods and services, updated regularly to reflect changing consumer habits.

• Published Regularly: The index is typically updated monthly or quarterly, providing a snapshot of how prices are moving.

• Different from CPI: RPI and CPI use slightly different methodologies—RPI includes mortgage interest payments, for example, which CPI does not.

RPI in Australia: 2025 Policy Shifts and Economic Impact

While Australia’s official inflation gauge is the CPI, RPI figures are still referenced in some wage negotiations, rental agreements, and private sector contracts. In 2025, several policy updates are reshaping how indexes like RPI and CPI are used:

• Wage Indexation: Some state awards and private agreements continue to use RPI-linked clauses, impacting pay rises for thousands of workers.

• Superannuation Adjustments: Certain legacy super funds and defined-benefit pensions still reference RPI for annual increases.

• Rental Market: Landlords and tenants may see clauses referencing RPI, especially in older leases. However, recent tenancy reforms are encouraging more CPI-based adjustments for transparency and fairness.

In 2025, the Australian Bureau of Statistics (ABS) continues to refine the way inflation is measured. Following public consultation in late 2024, the ABS began publishing more granular inflation data—empowering consumers and businesses to track specific cost-of-living pressures. This has led some sectors to reconsider their reliance on RPI, but the index still lingers in key areas of the economy.

How the RPI Influences Everyday Australians

Even if you don’t see “RPI” on your payslip or lease, its impact can ripple through your finances. Here’s how:

• Wage Growth: If your employment contract references RPI, your annual pay increase may be directly linked to the index’s movement. In 2025, with inflation moderating after the pandemic-era highs, RPI-linked raises could be smaller than those tied to the CPI.

• Rent and Bills: Some older rental agreements use RPI to calculate annual rent reviews. With the government’s push for CPI-based calculations, it’s important to check your contract and understand which index applies.

• Long-Term Planning: For retirees with defined-benefit superannuation, RPI-linked pension increases can affect retirement income. The recent federal review recommended phasing out RPI for newer funds, but many legacy arrangements remain.

For example, suppose your rent is set to increase by the RPI every 12 months. If the RPI for 2025 is 3.1%, your $500 weekly rent would rise to $515.50. If your wage agreement also references RPI, your take-home pay could rise at a similar rate—helping you keep pace with (some) rising costs.

Looking Ahead: The Future of RPI in Australian Finance

As the economy modernises and more contracts shift to CPI, the RPI’s role is slowly fading. However, for many Australians, especially those with longstanding agreements or pensions, it remains a key financial benchmark. In 2025, the key trends to watch include:

• Policy Harmonisation: Expect more sectors to migrate from RPI to CPI references, following government recommendations for consistency and transparency.

• Consumer Awareness: As cost-of-living pressures continue, understanding which index applies to your finances can help you budget and negotiate more effectively.

• Legacy Contracts: If you’re affected by an RPI-linked agreement, review your terms and consider renegotiating if possible—especially if CPI is more favourable.