April's inflation data came in softer than expected. For brokers, the temptation to read that as relief needs to be weighed against what the numbers actually show
Australia's headline Consumer Price Index rose 4.2% in the 12 months to April 2026, the ABS confirmed on Wednesday, down from 4.6% in March and below the market consensus of 4.4%. On a seasonally adjusted basis, the monthly CPI fell 0.1% – a result that surprised most forecasters, including Westpac, whose near-cast had been 0.9%.
The miss was heavily concentrated in items that do not speak to the underlying problem.
The Government's halving of the fuel excise on 1 April drove a 7% monthly fall in automotive fuel prices, after a 32.8% surge in March following the outbreak of the Iran conflict. Sue-Ellen Luke, ABS head of prices statistics, noted that despite April's fall, fuel prices remain 23.5% higher than in February before the conflict began.
Strip out those volatile movements and the picture is less comfortable. The trimmed mean – the RBA's preferred measure of underlying inflation – rose slightly to 3.4% annually from 3.3% in March.
Westpac economists Neha Sharma, Sian Fenner and Luci Ellis were direct in their post-release note: "While the headline April CPI was softer than expected, underlying inflation pressures are still building." Their forecast remains that the trimmed mean will rise to around 4% over coming quarters as energy-cost pass-through works more fully through the economy.
Housing: Still the dominant driver
For mortgage professionals, the most operationally significant data point remains housing, the highest-weighted group in the CPI basket, with annual inflation of 6.3%.
Electricity costs are 22.5% higher than a year ago as government rebates have expired. New dwelling purchase prices climbed 0.7% in April alone – the largest single-month increase since November 2023 – reflecting direct pass-through of elevated construction and freight costs.
Moody's April analysis, as reported by MPA, found Australia's national housing affordability reading stood at 29.6% of household disposable income in March. Sydney was worst at 40.4%. With the RBA having raised the cash rate three times this year to 4.35% – each 25-basis-point move adding roughly $90–$100 per month to a $600,000 variable mortgage – the cumulative 2026 hiking cycle has added approximately $270–$300 per month to that benchmark loan.
Labour market softening
The April labour force data showed the unemployment rate rising to 4.5% from 4.3% in March, with 33,000 more Australians out of work. Annual unemployment is up 12.3%. This is consistent with the RBA's expectation that higher borrowing costs are slowing household activity.
Equifax data reported by MPA showed new mortgage demand slowing from 10.9% year-on-year growth in the December 2025 quarter to just 3.6% in Q1 2026, turning marginally negative in March. Refinancing remains the market's engine room at 7.8% above year-ago levels – though down sharply from 16.2% in January.
What comes next
The major bank consensus is that May's hike likely marks the end of consecutive tightening, with CBA stating the Board now has "space to monitor" economic developments. Westpac is the outlier, still forecasting two further increases in June and August to a 4.85% peak.
As MPA has reported, MFAA chief executive Anja Pannek noted borrowers have already become more cautious, with confidence softening in the February Market Sentiment Survey. Roy Morgan data showed approximately 1.32 million mortgage holders – 24.9% of the total – were already at risk of mortgage stress before the March hike.
April's CPI was genuinely better than feared. It does not signal that the pressure on borrowers is easing. It signals that the worst of the shock may have passed. Those are different things.
