Australian inflation accelerated to its highest annual level in nearly three years, reinforcing expectations that the Reserve Bank of Australia may tighten monetary policy at its next meeting.
Data released by the Australian Bureau of Statistics (ABS) showed the Consumer Price Index (CPI) rose 4.6% in the 12 months to March 2026, up from 3.7% previously, although slightly below market expectations of a 4.8% increase.
Sue-Ellen Luke, ABS head of prices statistics, said: “Annual CPI inflation is the highest it’s been since September 2023.”
Housing remained the largest contributor to annual inflation, rising 6.5%. Transport costs also surged, increasing 8.9% over the year.
On a monthly basis, CPI rose 1.1% in March, driven primarily by a sharp increase in transport costs, which climbed 9.2%. This was largely due to a significant spike in fuel prices.
Trimmed mean inflation, a key measure of underlying price pressures, held steady at 3.3% over the same period, indicating that core inflation remained relatively contained despite the headline rise.
“Automotive fuel prices rose 32.8 per cent from February to March, which pre-dates the halving of the fuel excise on 1 April. The increase in March is the largest monthly increase since the series began in 2017, reflecting the impact of the conflict in the Middle East on fuel prices.” Ms Luke said.
Fuel price data highlighted the extent of the surge. Average prices for regular unleaded petrol rose 33%, increasing from 171 cents per litre in February to 228 cents per litre in March. Premium unleaded climbed 30% to an average of 250 cents per litre.
Diesel prices also rose sharply, increasing 41% from 181 cents per litre in February to 256 cents per litre in March, accounting for a notable portion of overall transport cost increases.
Electricity prices added further upward pressure, rising 25.4% compared with a year earlier, as Commonwealth and state government rebates that had previously reduced household energy costs expired.
With inflation pressures broadening, particularly across energy and housing, markets are increasingly pricing in further monetary tightening.
According to the ASX RBA Rate Tracker, as at 28 April, the ASX 30 Day Interbank Cash Rate Futures May 2026 contract was trading at 95.74, implying a 76% probability of an interest rate increase to 4.35% at the next Reserve Bank of Australia board meeting.
