Australia Inflation Gauge Cools from Record Peak

Australia’s Melbourne Institute Monthly Inflation Gauge rose 0.6% month-on-month in April 2026, easing from a record 1.3% surge in the previous month but marking a second straight monthly increase. The latest reading suggested inflation has moderated compared to last year, though underlying pressures remain, partly reflecting renewed cost strains since the second half of 2025. The Reserve Bank of Australia has already raised interest rates by 25 basis points in both February and March, bringing the cash rate to 4.1%. It is widely expected to tighten policy further in May. Meanwhile, annual inflation accelerated to 4.6% in March 2026 from 3.7% previously, the highest since September 2023 and still well above the central bank’s 2–3% target band.

Australia’s Monthly Inflation Measure, compiled by the Melbourne Institute, climbed 1.3% month-on-month in March 2026, reversing a 0.2% drop in the previous month and marking the strongest increase on record. The sharp rebound pointed to renewed price pressures since the second half of 2025, driven in part by higher fuel and transport costs and lingering supply-side frictions. Heightened uncertainty over the Middle East conflict has also lifted global energy prices, adding to the risk of imported inflation for Australia. The annual inflation stood at 3.7% in February, little changed from the prior 3.8%, remaining above the Reserve Bank of Australia’s 2–3% target band, suggesting price pressures are still proving sticky despite earlier signs of moderation.

Australia’s Monthly Inflation Gauge, compiled by the Melbourne Institute, fell 0.2% month-on-month in February 2026, reversing a 0.2% rise in the previous month and marking the first decline since last August. The pullback likely reflected softer prices for fuel and some discretionary goods after earlier seasonal increases, alongside easing supply-chain pressures. The latest result highlighted progress made in easing inflation over the past year despite signs of renewed cost pressures in H2 of 2025 amid elevated service expenses and a tight labor market. In January, the annual inflation held at 3.8%, unchanged from the prior month but remained outside the central bank’s 2–3% target, suggesting underlying price pressures remain sticky even as headline momentum cools.