Consumer prices higher than expected in April
“Australian disinflation has stalled,” ANZ economists Adelaide Timbrell and Aaron Luk have proclaimed after today’s consumer price index (CPI) print for April came in hotter than expected.
The monthly CPI indicator remained unchanged from March at 2.4% year on year, a slightly higher figure than the 2.3% forecast. Annual trimmed mean inflation also edged up slightly to 2.8%.
Inflation excluding volatile items and holiday travel also rose to 2.8%, suggesting persistent pressures across several categories.
White economic anxieties over US President Donald Trump’s erratic tariff agenda persist, “it is too early, in the April data, to see much of the impacts of tariff-related trade uncertainty on prices”, said Timbrell and Luk.
“One aspect of this – the impacts of the lower (Australian dollar) through April – will be cushioned by FX hedging of retail players, particularly because of the Australian retail sector’s relative concentration,” they added.
Key contributors to annual inflation included food and non-alcoholic beverages (+3.1%), recreation and culture (+3.6%) and housing (+2.2%).
Within housing, rents rose 0.3% month on month in April and new dwelling prices increased by 0.5%, while electricity prices climbed 1.5% but remained 6.5% lower on a yearly basis. Without government rebates, electricity would have seen a 1.5% annual rise.
ANZ also noted that supply disruptions due to bird flu outbreaks pushed egg prices up 18.6% year on year.
Attention now turns to what this stalling inflation trend means for interest rates.
Having enacted 50 basis points of cuts year to date, the big banks have conflicting thoughts on what the Reserve Bank of Australia (RBA) next has in store.
NAB has an aggressive stance, with four more rate cuts tipped for 2025 (although the major’s 50-basis-point May cut forecasts failed to materialise), while ANZ has maintains that just two are in the pipeline.
The next RBA meeting is scheduled for 7 July.
