Australian inflation expectations remain elevated in April
- Sydney (14 April)
Australian consumers’ two-year forward inflation expectations stood at 6.7% over 6 – 12 April, down from 7.2% a week ago but substantially above historical levels, survey data from ANZ and Roy Morgan show.
The US and Iran’s announcement of a two-week ceasefire on 8 April led to a brief drop in oil prices, which likely supported the drop in inflation expectations, ANZ Economist Sophia Angala said on 14 April.
Brent crude futures prices fell from $101.1/barrel (A$142.8/barrel) on 7 April to $94.4/barrel on 8 April, immediately after the ceasefire announcement. But prices have since risen back to $98.5/barrel because of the US Navy’s ongoing blockade of Iranian ports.
Consumers’ inflation expectations have averaged 7% over the last four weeks, higher than at any point since at least 2010, according to the ANZ-Roy Morgan survey. They averaged 4.9% over 2024 and 2025, survey data show.
Australian businesses have also faced recent cost pressures. They reported that purchasing costs rose by 3% on a quarterly basis in March, up from 1.3% in February, data from NAB’s Monthly Business Survey show.
Diesel prices – which impact freight costs – increased across every Australian state in March. In New South Wales, diesel prices averaged A$2.56/litre over the month, up from A$1.82/litre in February, data from government-run price monitor FuelCheck show. The average price of diesel in the state hit $3.04/litre on 14 April.
Input and diesel cost inflation is placing upward pressure on the price of goods. Final product prices increased by 1.1% on a quarterly basis in March, up from 0.7% in February, according to NAB’s survey. But this did not lead to higher retail prices.
Retail prices rose at a quarterly rate of 0.5% in March, according to surveyed businesses, down from 0.9% in February.
Higher inflation expectations and business costs could impact interest rates. The Reserve Bank of Australia’s (RBA) plan to tackle inflation relies on stable inflation expectations.
“We think if we can bring the positive output gap ... down to zero, then that will help to bring down [inflationary] pressures and we will bring inflation down with it, provided inflation expectations stay anchored,” RBA Governor Michele Bullock said at a press conference on 17 March.
The RBA left its cash rate target unchanged at 4.1% on 17 March. The bank’s Monetary Policy Board will next update the target on 5 May.
By Avinash Govind