Australian inflation rates dips to 4.2% in April
Sydney (27 May)
Australia’s annual consumer inflation rate reached 4.2% in April, down from 4.6% in March, largely because of an excise cut-driven drop in diesel and petrol prices, data from the Australian Bureau of Statistics (ABS) show.
The Reserve Bank of Australia (RBA) expects annual consumer inflation to peak at 4.8% in June 2026, under its baseline forecast, it said on 5 May. RBA’s forecast depends on Iran quickly reopening the Strait of Hormuz and allowing shipping flows to restart, the bank said.
Transport prices rose 6.6% over the year to April, down from 8.9% over the year to March, ABS data show. Annual transport inflation fell in April because the Federal Government halved Australia’s petrol and diesel excise rate from A$0.53/litre to A$0.21/litre for three months in early April.
Unleaded 91 octane petrol prices averaged A$2.06/litre in April, down from A$2.28/litre in March, according to the ABS. But they remain elevated relative to their February average of A$1.71/litre, from before the start of the US-Israeli war in Iran.
Petrol prices and transport inflation could rise again from July, when Australia’s fuel excise cut expires. The Government is unlikely to extend the cut, Energy Minister Chris Bowen indicated on 24 May. “The excise [cut] is … a temporary measure, and we envisage it being a temporary measure,” Bowen said at a press conference.
Brent crude oil futures traded at $97.81/barrel (A$136.76/barrel) on 27 May, down slightly from $109.03/barrel on 2 April, when the Government expanded its excise cut. But futures prices are up from $72.87/barrel before the Iran war began.
Food and non-alcoholic beverage prices rose 2.8% on the year in April, down from 3.1% in March, ABS data show. Overseas demand for Australian red meat drove up food prices in April, with beef prices rising by 12% on the year and lamb and goat prices rising by 15%, according to the ABS.
Other grocery products did not rise very much in April. Annual bread inflation hit 0.7% in April, up from 0.6% in March, while annual fruit and vegetable inflation fell from 1.8% in March to 0.1% in April.
But this could change in the coming months. The RBA expects businesses to pass on elevated fuel costs relatively quickly, Assistant Governor Sarah Hunter said in a speech on 19 May. Petrol and diesel costs account for 3-5% of the final price of groceries, fruits, and vegetables, RBA data released alongside her comments show.
Iran-war-related price increases and recent interest rate increases mean that suppliers cannot continue to fully absorb elevated costs, the Australian Food and Grocery Council (AFGC) said on 8 May.
“Retailers and suppliers cannot continue to swallow these increases without a long-lasting impact on our industry,” AFGC CEO Colm Maguire said. “To protect jobs … and to ensure the sustainability of [the sector], profitable operations are not a luxury, they are a necessity,” Maguire added.
By Avinash Govind