Soaring gas pump prices hit consumers' wallets, with more pain expected to follow
Annual inflation spiked to 4.6% in March from 3.7% in February, as the effects of the US-Israel-Iran war swept across the Australian economy.
While slightly below the 4.8% expected by the market, it still represents the largest annual inflation rate since late 2023.
Trimmed mean inflation – which the Reserve Bank of Australia (RBA) watched closely when plotting its cash rate path – matched forecasts at 3.3% annually.
As expected, transport costs soared by 8.9%, reflecting skyrocketing costs at the gas pump as the Strait of Hormuz blockade slashed global oil supply by a fifth.
Brent Crude futures, which serve as a benchmark for global oil prices, stayed above US$100 per barrel throughout March. And despite prices cooling off in April amid hopes of peace talking between the warring nations, prices have once again travelled above US$110 per barrel at the time of writing.
Housing costs increased by 6.5% and food and non-alcoholic beverages increased by 3.1%.
Today’s data print effectively seals the deal on another RBA interest rate hike when the Monetary Policy Board meets up next Tuesday, 5 May, which will bring the central bank rate to 4.35%. The markets are currently pricing in a 78% chance of a rate hike being approved.
VanEck’s head of investments and capital markets Russel Chesler expects inflation to move even higher in April.
“Many suppliers held off increasing prices in March, food prices are expected to continue to increase with rising fuel and fertiliser costs forcing increases in staples like bread, milk and fresh produce. Coles has increased its own-brand milk prices by 20 cents a litre after being lobbied by dairy farmers,” he said.
“We also expect wages to start reacting to rising inflation. Fair Work is expected to release its decision on the minimum wage increase, which flows through to about 50 per cent of wage earners, early in June.”
More to come.
