Australia’s latest inflation figures have brought some relief to borrowers, reducing the chances of another interest rate increase next month. However, economists warn that further rate hikes may still happen later this year.
New figures released by the Australian Bureau of Statistics (ABS) showed that annual headline inflation fell from 4.6% to 4.2% in April.
This was slightly better than market expectations, which had predicted inflation at around 4.4%.
The Reserve Bank’s preferred measure of underlying inflation, known as the trimmed mean, increased slightly from 3.3% to 3.4%. Although overall inflation eased, underlying price pressures remain a concern.
Treasurer Jim Chalmers welcomed the lower inflation numbers but said inflation remains above desired levels. He noted that global factors, including the conflict in the Middle East, continue to affect the economy.
Lower fuel prices helped reduce inflation after temporary cuts to fuel taxes, improved supply conditions, and free public transport initiatives in some states.
AMP economist My Bui said the latest figures make it likely that the Reserve Bank of Australia (RBA) will keep interest rates unchanged in June. However, she believes another rate increase could happen in August if underlying inflation continues rising and economic growth remains strong.
eToro analyst Josh Gilbert also said inflation remains well above the RBA’s target range of 2–3%, leaving the central bank with limited flexibility. He said while rates are expected to stay at 4.35% in June, another increase later this year is still possible.
Meanwhile, Canstar’s Sally Tindall described inflation as remaining “stubborn,” warning that a pause in June would not necessarily mean the end of future rate hikes.
Australia’s inflation rate remains higher than many countries including the UK, US, Canada, New Zealand, the European Union, and Japan, despite recent interest rate increases.