Australia's annual pace of inflation eased further in July following moderation in the previous month, but the reading still came in above analyst forecasts amid rising housing costs.

The country's consumer price index rose 3.5% in the 12 months to July, down from 3.8% in June, data from the Australian Bureau of Statistics showed on Wednesday.

Annual trimmed mean inflation, which is the Reserve Bank of Australia's preferred measure of underlying price pressure, remained unchanged month over month at 3.6% in July.

ANZ Research recently forecast annual consumer price index growth to slow to 3.2% year over year.

Housing was the biggest contributor to annual inflation in July with an increase of 5% due to rising costs for new dwellings, followed by food and non-alcoholic beverages at 3.2%, and recreation and culture at 2.6%. Annual inflation for transport was 1.6%, accelerating from 0.1% in June.

"New dwellings prices rose 5.7% in the 12 months to July as builders passed on higher costs for materials and labor," said Rachael McCririck, head of price statistics at the ABS.

The latest data could add fuel to the case for another rate hike, as the minutes of the Australian central bank's most recent meeting showed that policymakers are concerned about upside risks to the inflation forecast. While the central bank left rates unchanged at 4.35% earlier in August, several board members advocated for further tightening of 25 basis points, the minutes showed.

The Reserve Bank of Australia has raised borrowing costs three times this year and is due to meet again in late September.