Aussie inflation undershoots expectations

The Australian Bureau of Statistics (ABS) has released CPI inflation data for March, showing a headline CPI inflation rate of 4.6% for the year, below economists’ expectations of a 4.8% rise.

Even so, headline inflation rose by 0.9% from February, driven by a 33% increase in fuel costs due to the war in the Middle East. This drove an 8.9% increase in transport inflation:

It was also the highest headline CPI print since September 2023.

More encouragingly, the policy-relevant trimmed mean inflation, which strips out volatile items like fuel, was flat at 3.3%, the same as February’s result.

As illustrated below by Alex Joiner from IFM Investors, trimmed mean measures have come in lower than the RBA had expected, but the upside risks in future prints remain:

The last RBA decision was line-ball, with five members voting in favour of hiking and four against.

The better-than-expected inflation print for March could create another close call next week when the RBA meets.

That said, the RBA will be concerned with the broadening of inflation, as illustrated by the surge in construction input prices as suppliers pass on higher fuel costs.