Core inflation, which excludes volatile energy and food prices, also saw a slight decrease of 0.1 percentage points, settling at 2.8%.

The trimmed mean measure of underlying inflation dropped to 3.4%, down from 3.8% in the previous month.

Government rebates on electricity contributed to a substantial 14.6% decrease in electricity prices, which helped mitigate inflation.

The decline in inflation is largely attributed to government initiatives aimed at reducing high energy costs for consumers.

In August, Australian consumer price inflation fell to a three-year low of 2.7%, down from 3.5% in July, marking a significant decline.

Despite the overall decline in inflation, underlying inflation remains a concern, with the trimmed mean core inflation still above the Reserve Bank of Australia's target range of 2-3%.

Governor Michele Bullock of the Reserve Bank of Australia indicated that, despite the positive inflation news, interest rates are unlikely to be cut soon.

The RBA has maintained interest rates at 4.35%, aiming for sustainable inflation control amid ongoing economic challenges.

Treasurer Jim Chalmers described the inflation figures as 'heartening', attributing part of the decline to government cost-of-living relief measures and lower petrol prices.

Petrol prices also fell significantly, with the annual rate decreasing to -7.6%, reflecting a drop in average petrol prices from $2 per litre last year to $1.85.

Core inflation is viewed by many economists as a more reliable indicator of underlying inflation trends than the overall rate.

This CPI reading aligns with market forecasts and represents a significant decrease from the previous month.