Australia Inflation Gauge Eases for First Time in 3 Months

Australia’s Melbourne Institute Monthly Inflation Gauge fell 0.3% month-on-month in May 2026, reversing a 0.6% increase in the previous month and marking the first decline since February. The decline reflected easing price pressures across a range of goods and services, after recent data showed the annual inflation rate slowed to 4.2% in April from 4.6% previously, as automotive fuel prices rose at a softer pace following the reduction of the fuel excise. However, inflation remained well above the central bank’s 2–3% target range, suggesting underlying price pressures are still elevated despite the recent moderation.

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.