All signs point to an interest rate cut in May, with inflation on the right track as the monthly consumer price figure heads lower.
The index fell 10 basis points to 2.4 per cent in the year to February after holding at 2.5 per cent for two months.
The trimmed mean, the Reserve Bank's preferred measure of price growth, also fell 0.1 per cent to 2.7 per cent.
Australian CPI was "under control", according to a research note from JP Morgan chief investment strategist Tom Kennedy.
"While electricity subsidies have contributed to the recent downshift in headline inflation, the return of trimmed mean to the target band, in our view, provides the RBA with scope to ease policy and we retain our forecast for another 25bp rate cut in May," Mr Kennedy wrote.
The result beat some estimates but was foreshadowed by AMP chief economist Shane Oliver on Tuesday.
"It’s doubtful this will be enough to see the RBA ease again at its 1 April meeting, preferring to wait and see the more reliable March quarter CPI data ahead of its May meeting where we do expect it to ease again," Dr Oliver said.
The print also failed to surprise interest rate markets, which were still pricing-in 17 basis points of cuts by May, and a cumulative 65 basis points of cuts for 2025 after the data dropped, IG Markets strategist Tony Sycamore said.
"The RBA's hawkish 25 basis point rate cut in February has been followed by a slowing global growth outlook, softer-than-expected Australian wages and jobs data and another benign inflation print today," Mr Sycamore said.
The Australian dollar dipped briefly by 30 basis points soon after the data release but recovered quickly to trade at 63.01 US cents.
Turning to the budget, AMP's Dr Oliver said the blueprint would make it harder for the RBA to bring inflation under control, even though cost-of-living measures would help lower measured inflation.
"But the new stimulus, the shift from surplus to deficit and average 5.5 per cent year-on-year projected growth in federal spending to 2028/29 will boost demand in the economy," he said.
"We don’t think it precludes more rate cuts but it means rates will be higher than would otherwise have been the case."
Proposed income tax cuts unveiled in the budget and introduced to parliament on Wednesday would support household spending in the medium term if legislated, JP Morgan economist Ben Jarman said.
But the policy shouldn't have a material bearing on the RBA's near term decision-making, given it wouldn't come into effect until mid-2026.
"We continue to forecast a rate cut in May," Mr Jarman said.
The top contributors to price growth over the year to February were food and non-alcoholic beverages, up 3.3 per cent, housing, which rose 2.1 per cent and alcohol and tobacco, up 6.4 per cent.
Energy prices fell over the period,mainly because of government rebates, ABS head of price statistics Michelle Marquardt said.
"Electricity prices fell 13.2 per cent in the 12 months to February, compared to an 11.5 per cent annual fall to January," Ms Marquardt said.
"Excluding all commonwealth and state government rebates, electricity prices would have fallen 1.2 per cent in the 12 months to February."
