March Quarter CPI
The March 2026 CPI release confirms a renewed inflation pulse and materially tightens the near-term policy outlook. Headline CPI rose 4.6% year on year (YoY), well above the RBA’s 2–3% target band. The surge was overwhelmingly energy-led, with fuel prices rising 32.8% over the month as global oil supply disruptions intensified amid the conflict in the Middle East. Despite petrol’s relatively small weight in the CPI basket, it drove the bulk of the monthly increase. At the same time, housing, transport, and food inflation remain elevated, reinforcing that price pressures were already embedded before the shock.
Underlying inflation remains the key policy concern. The trimmed mean measure printed at 3.3% YoY, still above target but slightly softer than expected. This suggests that while the latest upside surprise is concentrated in volatile components, domestic inflation remains persistent, limiting the RBA’s ability to look through the current spike. Treasurer Jim Chalmers has warned that higher fuel costs are likely to spread more broadly across the economy, raising the risk of second-round effects via transport costs, services inflation, and wage-setting behaviour.
For monetary policy, the CPI print sharpens an already finely balanced decision. Elevated underlying inflation and the risk of inflation expectations becoming unanchored support the case for near-term tightening, with markets pricing a 75% chance of a 25bp rate hike to 4.35% next Tuesday. However, the externally driven nature of the shock and clear signs of weakening sentiment complicate the outlook, increasing the risk of overtightening into a slowing economy.
From a macro perspective, the near-term trajectory is characterised by higher inflation prints alongside slowing growth momentum. Prime Minister Anthony Albanese has framed the upcoming budget around resilience and social cohesion, but inflation remains the more immediate constraint, both economically and politically. Until then, all eyes turn to the RBA’s policy decision and Michele Bullock’s press conference next Tuesday.
Source: Australian Bureau of Statistics, Consumer Price Index, Australia, April 2026.