Inflation gauges show sustained upward pressure in Australia and New Zealand
ANZ has forecast further interest rate increases across both Australia and New Zealand as inflation continues to climb, driven in part by rising fuel costs linked to the conflict in the Middle East.
ANZ’s Australian economist, Sophia Angala, said consumer confidence rose 3.5 points to 67.8 in the week of April 20–26, reaching its highest level since mid-March, though the index remains among its lowest readings since the series began in 1973.
“Weekly inflation expectations fell to 6.6% last week, their lowest rate since early March, following the escalation of conflict in the Middle East,” Angala said. “This comes ahead of the Q1 Consumer Price Index release.”
ANZ forecast headline inflation to have risen 1.4% quarter-on-quarter in Q1, partly reflecting higher fuel prices in March. The bank said it continues to expect the Reserve Bank of Australia (RBA) to increase the cash rate by 25 basis points at its May meeting – a view shared by all four of Australia’s big banks, according to financial comparison site Canstar.
Inflation continues to rise
Australia’s headline inflation reached an annual rate of 4.6% in Q1 2026, up from 3.7% in the previous quarter, according to data from the Australian Bureau of Statistics. Trimmed mean inflation, which strips out volatile items, rose to 3.5% – its third consecutive quarterly increase.
Canstar data insights director Sally Tindall said the latest figures presented a difficult choice for the RBA board.
“Today’s CPI figures are undeniably hot and could be enough to push the RBA into firing off a third consecutive hike,” Tindall said. “Another hike on Tuesday would help get the inflation job done, but at what cost? This is what will be weighing heavily on the Board’s mind. Push too hard, and the economy could buckle.”
Across the Tasman, ANZ New Zealand economists maintained their forecast of a 2% overall decline in house prices this year, alongside three hikes to the Official Cash Rate (OCR) beginning in July. The bank, New Zealand’s largest home loan lender with $115 billion in total exposure as of Dec. 31 last year, cited rising interest rate pressures as the primary concern for the housing market.
“Inflation was already lurking troublesomely above the Reserve Bank’s target range at 3.1% before the [oil price] shock and is now set to go much higher – we see it peaking at 4.4% in the second quarter of 2026,” the ANZ NZ Property Focus Report noted.
