Australian inflation rate hits 4.6% in March
Sydney (29 April)
Australia’s annual consumer inflation rate hit 4.6% in March, partly because of fuel price increases linked to the US-Israeli war in Iran, data released by the Australian Bureau of Statistics on 29 April show.
Regular unleaded petrol and diesel prices rose 33% and 41% on the month in March, respectively, pushing up Australia’s annual automotive fuel inflation rate to 24%, ABS data show.
Australia’s annual automotive fuel inflation rate last exceeded 20% in July 2022, soon after Russia’s invasion of Ukraine.
Australian fuel prices were falling before Israel and the US attacked Iran on 28 February. The country’s annual automotive fuel inflation rate dipped to -7.2% in February.
But global oil prices spiked in March because Iran closed the Strait of Hormuz at the start of the Iran war. Brent crude futures traded at $111.18/barrel on 29 April, up from $72.87/barrel on 27 February, data from Trading Economics show.
Fuel price increases were not the sole driver of inflation in March. Australian food, alcohol, clothing, housing, and education costs all increased by at least 3% on the year that month.
Elevated gold and silver jewellery costs caused clothing prices to rise in March, while electricity cost increases drove housing cost inflation.
Electricity costs rose by 25% on the year in March because households ran out of electricity price rebates, ABS data show. Annual electricity inflation hovered at just 3.9% in March, after excluding the impact of rebates, according to the ABS.
Wholesale electricity prices fell on the year across every state in Australia’s National Energy Market, data from the Australian Energy Market Operator show.
Australian consumer inflation expectations have increased over recent weeks. Consumers’ two-year forward inflation expectations reached 6.6% over the week to 26 April, according to polling from ANZ and Roy Morgan.
This is down from 7.1% over the week to 19 April, likely because of the US and Iran’s fragile ceasefire, but up from 5.3% over the week to 1 March.
High inflation expectations could drive up interest rates. In February, the Reserve Bank of Australia (RBA) said that its plan to tackle inflation relied 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.
Futures prices indicate that there is a 76% chance that the RBA lifts interests rates from 4.2% to 4.35% at its next meeting on 5 May, according to the Australian Stock Exchange.
By Avinash Govind