Inflation rise further above target
Against a backdrop of the biggest oil shock since the 1970s, the inflation figures were released for March 2026.
Headline inflation came in at 4.6 per cent over the year, a little below the median market expectation of 4.8 per cent.
Surprisingly, trimmed mean inflation was flat at 3.3 per cent for the 12 months to March 2026 (and 3½ per cent for the March 2026 quarterly data).
Source: ABS
No prizes for guessing the main source of the increase in March, with auto fuel prices steepling 33 per cent higher.
Over the year to March, the increase in fuel prices was dwarfed by an even larger increase in electricity prices as the rebates have rolled off.
Interestingly, fuel prices have since fallen back down to earth, but this is partly due to the government's fuel excise cut, and it's not yet clear whether this temporary policy will be extended into the new financial year.
Housing costs continued to rise, with new dwelling prices becoming ever more expensive, and rents looking very likely to accelerate given record low rental vacancy rates.
New dwelling costs had increased by 48 per cent since 2017 up until March 2026, but this increase is about to get much steeper again as materials costs bite.
Australia's 3-year bond yield fall back quite sharply on the news, to 4.68 per cent at the time of writing.
That having been said, it is logical that many of the impacts of the Iran conflict will not be felt in the consumer price index until the June and September quarters.
Although some news stories noted that the the softer than expected inflation figures for March give the central bank the option to wait until after the May Federal Budget before making a move on interest rates, the path of least regret is still most likely to be a 25 basis point hike on May 5.
This will take the cash rate target back up to the previous cycle high of 4.35 per cent.
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