Inflation rose last month to its highest level since February as economists blamed US President Donald Trump’s tariffs for pushing up the cost of items such as groceries, clothes and furniture.

Consumer prices rose 2.7 per cent in June from a year earlier, the US Labor Department said on Tuesday, up from an annual increase of 2.4 per cent in May.

On a monthly basis, prices climbed 0.3 per cent from May to June, after rising just 0.1 per cent the previous month.

Worsening inflation poses a political challenge for Trump, who as a candidate promised to immediately lower costs but instead has engaged in a whipsawed frenzy of tariffs that have jolted businesses and consumers.

Trump insists that the US effectively has no inflation as he has attempted to pressure Federal Reserve chair Jerome Powell into cutting short-term interest rates.

Yet the new inflation numbers make it more likely that the US central bank will leave rates where they are.

Powell has said that he wants to gauge the economic impact of tariffs before reducing borrowing costs.

Excluding volatile food and energy, core inflation increased 2.9 per cent in June from a year earlier, up from 2.8 per cent in May.

On a monthly basis, it picked up 0.2 per cent from May to June.

Economists closely watch core prices because they typically provide a better sense of where inflation is headed.

The uptick in inflation was driven by a range of higher prices.

The cost of petrol rose 1 per cent just from May to June while grocery prices increased 0.3 per cent.

Appliance prices jumped for the third straight month.

Toys, clothes, audio equipment, shoes and sporting goods all got more expensive, and are all heavily imported.

“You are starting to see scattered bits of the tariff inflation regime filter in,” Eric Winograd, chief economist at asset management firm AllianceBernstein, said.

Winograd also noted that housing costs, a big inflation driver since the pandemic, have continued to cool, actually holding down broader inflation.

The cost of rent rose 3.8 per cent in June compared with a year ago, the smallest yearly increase since late 2021.

“Were it not for the tariff uncertainty, the Fed would already be cutting rates,” Winograd said.

“The question is whether there is more to come, and the Fed clearly thinks there is,” along with most economists.

Some items got cheaper last month, including new and used cars, hotel rooms and airfares.

French Prime Minister Francois Bayrou has proposed scrapping two public holidays and freezing most public spending as part of a budget squeeze.

Bayrou’s plan involves freezing welfare spending and tax brackets in 2026 at 2025 levels, not even adjusting for inflation, which was immediately criticised by opposition MPs. 

Defence spending, however, will increase.

France’s budget deficit hit 5.8 per cent of gross domestic product last year, nearly double the official European Union limit of 3 per cent of GDP, as a political crisis left four successive governments paralysed and incapable of tackling an unexpected drop in tax income and surge in spending for a second year.

“Everyone will have to contribute to the effort,” Bayrou said, warning that public debt was a “mortal danger” for France and needed to be tackled head on.

The welfare spending freeze will likely be as unpopular for many voters as scrapping two public holidays – possibly Easter Monday and May 8, which commemorates the end of World War II in Europe.

There are simply too many public holidays in May and the French must get back to work that month, Bayrou said, adding that this would mean billions in additional revenues for the state as everybody will work more and produce more.

Bayrou’s proposals are “massively unfair,” Socialist politician Johanna Rolland, the mayor of Nantes, said on X.

Bayrou, a veteran centrist politician, must persuade the opposition ranks in France’s fractured parliament to at least tolerate his cuts, or risk facing a no-confidence motion like the one that toppled his predecessor in December over the 2025 budget.

Any risk of a no-confidence motion would likely only firm up once a detailed budget bill goes to parliament in October.

President Emmanuel Macron has left Bayrou the task of repairing the public finances with the 2026 budget, after his own move to call a snap legislative election last year delivered a hung parliament too divided to tackle the country’s spiralling spending.

If he fails, a new political crisis could trigger more credit ratings’ downgrades and drive up the cost of interest payments, which are already set to become the single biggest drain on the budget at more than 60 billion euros ($A107 billion).

Bayrou aims to reduce the budget deficit from 5.4 per cent of GDP this year to 4.6 per cent in 2026, ultimately targeting the EU’s 3 per cent fiscal deficit limit by 2029.

“It’s the last stop before the cliff, before we are crushed by the debt,” Bayrou said on Tuesday.

A rise in construction costs is likely to stoke inflation while pushing home-building targets further out of reach, fresh data analysis suggests.

Construction costs rose 0.5 per cent in the June quarter, picking up slightly from a 0.4 per cent rise in the March quarter, according to property analyst Cotality’s latest Cordell Construction Cost Index.

The re-acceleration is likely to weigh on inflation outcomes because the cost of new dwellings comprises the largest weight in the consumer price index, Cotality research director Tim Lawless said.

While noting the increase was half the pre-pandemic decade average of one per cent, Mr Lawless said builders struggle with feasibility assessments amid high material and labour costs.

“With the cost of building a new home continuing to rise, the (government’s) stretch target of building 1.2 million new homes by July 2029 is looking harder and harder,” he said.

Property Council of Australia policy and advocacy executive Matthew Kandelaars said the uptick in construction costs “chips away at the feasibility of new housing projects” when the nation needs to be accelerating towards the target of 1.2 million new homes.

Better investment and tax settings are needed, Mr Kandelaars said, along with smarter and more efficient approvals and more skilled workers to build the homes.

“Without this balance, we’ll remain stuck in a doom-loop of low margins, constrained project feasibility, cost blowouts and delivery delays.”

Independent government advice body the National Housing Supply and Affordability Council warned the federal government in a May report that it would fall short of its 2029 goal by about 300,000 dwellings.

Western Australia recorded the largest quarterly increase in construction costs in the three months to June at 0.7 per cent, followed by Victoria (0.6 per cent), NSW and South Australia (0.5 per cent) and Queensland (0.4 per cent).

Cotality said the latest data reinforces commentary from the Reserve Bank in its July 8 decision to maintain the cash rate at 3.85 per cent, which highlighted as a concern the re-acceleration of growth in the cost of new dwellings via the monthly CPI indicator.

In her rates commentary, the central bank’s governor Michele Bullock noted certain components of monthly inflation – particularly home-building costs – had been “slightly stronger than expected”, which contributed to the decision to hold rates. 

The RBA added that high construction expenses continue to exert upward pressure on inflation, reinforcing its cautious stance.

Competition for skilled trades also remains intense amid a record level of public infrastructure spending, with Infrastructure Australia forecasting a mismatch between the demand and supply of labour until mid-2028.

This means continued inflation pressure is likely from building costs centred on the labour market, Mr Lawless said.

Australia will miss many of its most important goals unless its environment laws undergo a long-overdue transformation, an economic heavyweight has warned.

Ken Henry – a former Treasury secretary, NAB chairman and prime ministerial adviser – has urged Australia to overhaul its main environment act as the Labor government pursues a litany of economic reforms.

Its plans to build 1.2 million houses by 2029, boost renewable energy, and develop the critical minerals industry have taken attention away from the languishing Environment Protection and Biodiversity Conservation Act.

But Dr Henry says Labor’s ambitious proposals cannot be achieved without major reform.

“If we can’t achieve environmental law reform, then we should stop dreaming about more challenging options,” the Australian Climate and Biodiversity Foundation chair will tell the National Press Club on Wednesday.

“To put it bluntly, there is no chance of Australia meeting stated targets for net zero, renewable energy, critical minerals development, housing and transport infrastructure without very high quality national laws.”

These goals are also an answer to Australia’s flagging productivity which the government has been determined to address in its second term.

“Economics has, for the most part, ignored the most important constraints on human choices,” Dr Henry will say.

“Our failure to recognise that the laws of nature affect the set of feasible choices available to us is now having a discernible impact on productivity – and things are getting worse with accelerating speed.

“We need to break the deadlock.”

Reforms to main environment laws would need to ensure Commonwealth, state and territory governments can co-operate for a shared purpose, finalise effective national standards and establish an expert, independent decision maker in the form of a national environmental protection agency.

For more than two decades, the country’s main environment legislation has remained largely unchanged, even after a landmark review released in 2021 found the act was not fit to address current or future challenges.

Labor came into office with a promise to fix the laws, but its proposals have stalled following staunch criticism from scientists, environmentalists and mining industry groups.

Sweet and tangy jujubes could soon be on the way to Australian shelves as part of a broadened trade pact with China.

The agreement was one of six signed by Prime Minister Anthony Albanese and Chinese Premier Li Qiang on Tuesday as Australia and China sought to boost business links as US President Donald Trump upends the global trade order.

Jujubes, a small apple-like fruit, will be exported to Australia while apples from the Australian mainland will be allowed to be exported to China for the first time. 

Another four memoranda of understanding were signed by the pair as Mr Albanese met the highest-ranking Chinese leaders – President Xi Jinping, Premier Li and Chairman Zhao Leji – in the centrepiece of his six-day visit to China.

Australia and China must deepen economic co-operation given increasing trade frictions elsewhere, Mr Li said after a lavish welcome in Beijing’s Great Hall of the People. 

“In recent years, co-operation has encountered headwinds,” he said, adding that it was hard to find two countries with more complementary economies than Australia and China.

His comments were echoed by Mr Albanese. 

“My government believes unequivocally in free and fair trade as a driver of global growth, and I know the discussions that we’ve had today have been very constructive,” he said.

But the relationship is not without its challenges. 

China has chafed at Australia’s stringent foreign investment regime on Chinese firms. 

Mr Li said China would protect the rights of foreign businesses and treat them in accordance with the law, in an oblique reference to Australian plans to tear up a Chinese-owned company’s lease of Darwin Port. 

“I trust Australia will treat Chinese enterprise fairly and properly resolve issues regarding market access and investment review,” he told a gathering of Australian and Chinese business leaders.

Mr Li and Mr Albanese also signed an agreement to kickstart a review of the 10-year-old free trade agreement between the two nations. 

Collaboration on steel decarbonisation, increasing tourism links and paperless certification of agriculture products were also broached at the meeting. 

The prime minister will visit the Great Wall on Wednesday before flying out to Chengdu in the southwestern province of Sichuan – known as the home of the giant panda. 

US President Donald Trump says he has struck a trade deal with Indonesia.

“Great deal, for everybody, just made with Indonesia. I dealt directly with their highly respected President. DETAILS TO FOLLOW!!!” Trump said in a post on Truth Social.

Trump had threatened the southeast Asian country with a 32 per cent tariff rate effective August 1 in a letter sent to its president last week.

Trump sent similar letters to about two dozen trading partners this month, including Canada, Japan and Brazil, setting blanket tariff rates ranging from 20 per cent up to 50 per cent as well as a 50 per cent tariff on copper.

The August 1 deadline gives the targeted countries time to negotiate agreements that could lower the threatened tariffs.

Some investors and economists have also noted Trump’s pattern of backing off his tariff threats.

Since launching his tariff policy, Trump has reached trade agreements with three other countries: China, the United Kingdom and Vietnam.

Relations between China and Australia reached a “low point” but are back on track under Anthony Albanese’s leadership, Chinese Premier Li Qiang says.

The prime minister on Tuesday wrapped up a day of high-level talks in Beijing when he met with Mr Li at the Great Hall of the People.

China’s premier congratulated Mr Albanese on his re-election and for his “personal efforts” to stabilise the China-Australia relationship, which soured under the former Liberal government during the COVID-19 pandemic.

“China-Australia relations have moved beyond a low point and returned to the right track of stability and development,” Mr Li said.

Since the pair last met in October last year “a lot has happened in the world”, Mr Li said, and there was growing instability and uncertainty in the global economy.

“The development of all countries is faced with new challenges. Given such circumstances, China and Australia as important trade partners, should strengthen dialogue and co-operation,” he said.

Mr Albanese said he looked forward to the two nations exploring new opportunities in trade, climate change, tourism and culture.

“We’ll also have an opportunity to have a frank and open dialogue that enables us to navigate issues that need to be discussed,” he said.

The prime minister earlier used a meeting with President Xi Jinping to raise concerns over China’s lack of notice before it conducted military drills off the Australian coast.

The live firing exercise in international waters near Australia in February forced commercial flights overhead to divert.

Speaking after Tuesday’s meeting, Mr Albanese said he had secured a commitment for China to better inform Australia on military drills in the region.

The prime minister noted the drills being in international waters did not contravene international law “but that we were concerned about the notice and the way that it happened, including the live fire exercises”.

Australia’s position on there being no unilateral change to the status quo over Taiwan was also conveyed to the president, he said.

“We want peace and security in the region, that is in the interests of both Australia and China,” Mr Albanese replied when asked whether he had raised China’s unprecedented military build-up.

Mr Xi didn’t raise reports the United States had asked Australia to commit to teaming up during a potential conflict with China over Taiwan, nor Labor’s commitment to terminate a Chinese company’s lease of the Port of Darwin, Mr Albanese added.

The prime minister also raised the detention of Australian writer Yang Hengjun but said he did not expect immediate progress on the case.

Dr Yang was given a suspended death sentence in China on secretive national security charges that Australia rejects.

“I raised the case, you wouldn’t expect there to be an immediate outcome and that is not the way things work,” Mr Albanese told reporters.

The president was all smiles as he greeted his Australian guest in the East Hall – one of the many ornate chambers in the Great Hall of the People.

In a pointed prod at US isolationism under Donald Trump, Mr Xi said countries should work together to “support multilateralism and free trade, defend the UN-centred international system and the international order”.

The Chinese readout noted the prime minister “reaffirmed Australia’s commitment to the one-China policy and its opposition to ‘Taiwan independence'”.

The bilateral meetings with President Xi, Premier Li and Communist Party Chairman Zhao Leji – the three highest-ranking members of China’s ruling committee – mark the centrepiece of Mr Albanese’s six-day tour of the Middle Kingdom.

In his meeting with Mr Zhao, the chairman noted Mr Albanese’s visit so soon after his re-election showed the importance of the Sino-Australian relationship.

Earlier on Tuesday, Chinese security officials tried to stop Australian journalists, who were travelling with the prime minister’s delegation, from leaving a tourist attraction in Beijing after filming in the area.

The group of reporters had permission to film at the location, but were stopped by security officials and were told to hand over footage before police arrived.

The journalists were able to leave the site with the footage, despite being followed by security.

Australian and Chinese CEOs are pushing for increased mutual recognition of qualifications and the development of smart agriculture technology.

A roundtable of 28 business leaders – 14 from each country – has also called for more work on green steel and regular meetings between education ministers, in a report provided to the nations’ leaders.

The high-powered gathering in Beijing on Tuesday comes after Prime Minister Anthony Albanese met China’s top leaders in the centrepiece of his six-day sojourn to the Middle Kingdom.

Mr Albanese’s visit has focused on growing economic engagement between the two nations despite concerns over Chinese economic coercion.

In his meeting with President Xi Jinping, neither side brought up Australia’s plan to tear up a Chinese-owned company’s lease of Darwin Port, nor stringent restrictions on Chinese foreign investment in Australia.

An article by a Chinese state media-linked influencer published ahead of the meeting suggested Beijing could restrict Australian imports, including iron ore trade valued at more than $100 billion, in response.

Business Council of Australia chief executive Bran Black said business leaders should continue to pursue diversification as an “inherent good in and of itself” as well as increasing links with China.

“We want to see more trade, more Australian jobs, and a real future for Australian products in China – from decarbonisation of steel, to beef and rice products – and that was reflected in our discussion here in Beijing,” he said.

“One in four Australian jobs is trade dependent and so it is vital we increase trade opportunities with all our trading partners, including China.”

Australia’s economic reliance on China was exposed during the COVID-19 pandemic, when Beijing imposed restrictions across $20 billion worth of key exports over political grievances with Canberra.

At the time, Australia pursued a policy of trade diversification, successfully making up much of the shortfall with increased exports to countries such as Japan, South Korea and India.

But since a thaw in relations following Mr Albanese’s election in 2022, trade between Australia and China has rebounded.

“So from our perspective, we say let’s try and have the best possible relationship that we can with China. Let’s try and make sure that we can establish trade opportunities that help jobs and businesses back home,” Mr Black told reporters in Beijing.

“But let’s also concentrate on the engagements that we have overseas with countries like the United Arab Emirates, countries like India, countries like those in Southeast Asia.”

As well as greater collaboration on education and agriculture, the business communique pushed more work in healthcare, resources, and the green economy.

The men behind a landmark climate case say they will continue their fight to save their homelands.

On Tuesday, a court rejected a case led by Uncle Pabai Pabai and Uncle Paul Kabai that argued the Commonwealth owes a duty of care to protect their homes from the impacts of climate change.

The uncles filed the landmark case against the government in the Federal Court in 2021, claiming it failed to protect their homelands in the Torres Strait from the impacts of climate change.

They sought orders from the court that would require the government to take steps to prevent harm to their communities, including cutting greenhouse gas emissions in line with the best available science.

The court heard evidence communities on Boigu and Saibai could have less than 30 years left before the low-lying islands between northern Queensland and Papau New Guinea become uninhabitable.

“I’m feeling very emotional,” Uncle Pabai Pabai told AAP after the decision.

“I wasn’t thinking we’d lose this case … I’m very heartbroken.”

Mr Pabai said his main focus during the case had been his two-year-old son, and that was who he would keep fighting for.

“For the love of my son and for all the people in our community in the Torres Strait, for the bushfire and flood survivors, the farmers, kids and grandkids,” he said.

“I’ll keep fighting and will sit down with my lawyers and look at how we can appeal”

In handing down his decision, Federal Court Justice Michael Wigney accepted many of the key factual elements of the case, including the impacts of climate change on the islands.

“Unless something is done to address global warming and the resulting escalating impacts of climate change, there is a very real risk that the applicants’ worst fears will be realised, and they will lose their islands, their culture and their way of life, and will become, as it were, climate refugees,” he said.

Justice Wigney also found the Commonwealth had “paid scant, if any, regard to the best available science” when setting emissions targets between 2015 to 2021. 

The case failed because negligence law does not allow compensation when it comes to government policy decisions, he said.

Following the decision, Climate Change Minister Chris Bowen and Indigenous Australians Minister Malarndirri McCarthy said the government understood the Torres Strait Islands were vulnerable to climate change and were already feeling its impacts. 

“Where the former government failed on climate change, the Albanese government is delivering – because it’s in the interest of all Australians,” they said in a joint statement.

Shocked at the outcome, Uncle Paul Kabai said he’d like to ask the prime minister what to tell his family when he returned to Saibai Island. 

“Mr Albanese and his expensive government lawyers will stand up and walk away just like they walk out the door of this court today,” he said.

“They go home and sleep soundly in their expensive beds. We go back to our islands and the deepest pain imaginable. 

“I want to ask Mr Albanese what I should say when I go home to my family? How do I tell them we have less than 30 years left?”

Mr Kabai said he and Mr Pabai would take things “one step at a time” but were confident they would eventually win the battle. 

“The government is not listening to us,” he said.

“They know (climate change) is happening and they keep approving mining, keep pushing mining. 

“I want them to listen to our voices, not only ours but people around Australia and around the world.”

Tesla has opened its first showroom in India, marking the electric vehicle maker’s long-anticipated debut in the world’s third-biggest automotive market.

In the Bandra-Kurla Complex, an upscale business centre in the financial capital Mumbai, the showroom will serve as Tesla’s flagship retail and experience outlet as the company introduces its EV line-up to Indian customers.

Tesla’s entry to India comes after years of delays and policy friction, marking a pivotal expansion in a fast-growing consumer base while global sales are plunging and the company faces challenges in its two core markets, China and the US.

Sales of Tesla electric cars fell sharply from April to June as boycotts over tech billionaire Elon Musk’s political views continued keeping buyers away.

For India, Tesla’s entry signals rising investor confidence and strengthens its move towards clean mobility.

The country’s nascent electric vehicle market made up a little more than two per cent of total car sales in 2024. 

But the government wants to change that and increase the electric vehicle share to 30 per cent by 2030.

Tesla will begin by importing and selling its popular Y model cars in India. 

The base price would be 6.78 million rupees ($A120,000) for the long-range, rear-wheel drive vehicle, according to a presentation by the company during the showroom launch on Tuesday. 

By comparison, the price tag is about $US44,990 ($A69,000) in the US without a federal tax credit.

The rear-wheel drive will sell for about six million rupees in India. 

Delivery was expected to start from the third quarter, Tesla officials said.

Tesla’s higher pricing is likely to make its cars unaffordable for most Indians.

Tesla will compete mostly with German luxury car makers such as BMW and Mercedes Benz Group AG, and not budget Indian players such as Tata Motors and Mahindra & Mahindra. 

The luxury car market makes up just about one per cent of total vehicle sales

The debut by American EV giant, however, would bring in world-class technology to the country, auto analysts said.

Prime Minister Narendra Modi’s government has wooed Tesla for years for its global brand value and to boost the country’s clean energy endeavours.