The monthly consumer price index rose 4.9 per cent over the 12 months to October, down from the 5.6 per cent increase in September.
Expectations were for a 5.2 per cent annual lift through to October in the Australian Bureau of Statistics' monthly report on inflation.
When volatile items such as automotive fuel, fruit and vegetables and holiday travel were stripped out, the annual rise in October was 5.1 per cent, below the 5.5 per cent rise in the 12 months to September
Housing, food and non-alcoholic beverages, and transport were the biggest contributors to the annual growth.
Rents are still increasing but the rate of growth has slowed. (Lukas Coch/AAP PHOTOS)
A tight rental market continues to push up rents but the annual increase of 6.6 per cent in the 12 months to October was below the 7.6 per cent uptick in September.
Acting ABS head of prices statistics Leigh Merrington said a boost to Commonwealth Rent Assistance in September brought down rents for those eligible for the income support.
Treasurer Jim Chalmers said the monthly indicator revealed "substantial moderation".
"These monthly numbers jump around a fair bit which makes the quarterly figures more reliable, but the substantial moderation we see in these new inflation figures is still very welcome news," he said on Wednesday.
He said the government's cost of living plan was helping to bring down inflation.
Shadow treasurer Angus Taylor said it was important to target the source of the problem rather than the symptoms.
"The source of the problem that is leading to this rapid reduction in household disposable income is the simple fact that inflation is running too high," he told reporters.
The monthly consumer index is not as comprehensive as the quarterly update and the first month of the quarter is dominated by surveys measuring price changes across goods.
CommSec economists Craig James and Ryan Felsman said the absence of many services prices was important as they were behind "sticky" inflation concerns highlighted by Reserve Bank governor Michele Bullock.
Cherelle Murphy says the question is whether inflation is falling fast enough for the RBA. (Lukas Coch/AAP PHOTOS)
"Nevertheless, the gauge is a building block for the quarterly consumer price index release in late January 2024."
EY chief economist Cherelle Murphy said a sub-five result in the consumer price index was welcome news for the RBA.
"It's clear the 13 rate hikes that have taken the cash rate from 0.1 per cent to 4.35 per cent are working,'' she said.
"What is less clear is whether inflation is falling fast enough."
The economist said the data confirmed inflation had a "home-grown" element to it as Ms Bullock has consistently flagged, meaning interest rates were an effective tool.
"The trimmed mean fell only marginally from an annual rate of 5.4 to 5.3 per cent," she said.
"This is the figure that the Reserve Bank will be most focused on, as it removes one-off factors and picks up core inflation momentum."
She said the RBA would likely keep rates on hold at the December board meeting but there would be data over the summer that would be informative ahead of the next one in February.
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