Key Takeaways
- Headline CPI rose to 4.6% annually in March (vs 3.7% prior), the highest reading since September 2023.
- Trimmed mean unchanged at 3.3% — outside fuel, underlying price pressures aren’t accelerating.
- Consumer confidence rose 3.5pts to 67.8pts, but remains near historic lows.
- National home values rose just 0.3% in April, the weakest growth in nearly a year. Sydney and Melbourne both fell -0.6%.
- Markets pricing high probability of a 25bp RBA hike at the May meeting; AUD trading near multi-year highs around 0.71.
Market UpdateWhat the inflation print actually tells us
Inflation has moved higher again, with CPI rising 4.6% annually to March, up from 3.7% the prior month and marking the highest level since September 2023. The monthly increase was 1.1%, driven largely by a sharp lift in transport costs, particularly fuel, while housing remained the single largest contributor to annual inflation.
Underlying inflation is more stable than the headline suggests. Trimmed mean inflation was unchanged at 3.3% annually, indicating that, outside of volatile items like fuel, price pressures are not accelerating at the same pace.
There are early but limited signs of pass-through. Some categories such as construction, insurance and repairs recorded modest increases, but these remain scattered. Many price changes appear forward-looking, with businesses adjusting ahead of expected cost pressures rather than responding to current conditions.
Fuel remains the dominant driver of volatility. Petrol prices surged through March but came in slightly below expectations. Forward indicators suggest some near-term relief, although policy settings such as fuel excise changes could reintroduce volatility later in the year.
For policymakers, this creates a difficult balance. The data supports a near-term rate hike, but the trajectory beyond that will depend on whether higher prices materially dampen demand or begin feeding more broadly into wages and services inflation.
Consumer ConfidenceConfidence rises 3.5pts
HousingHousing market loses momentum, but not uniformly
National home values rose just 0.3% in April, down from 0.6% in March, marking the weakest monthly growth in nearly a year and signalling a clear loss of momentum. Two rate increases this year have lifted the cash rate to 4.1%, tightening borrowing capacity and weighing on buyer demand, particularly in more expensive markets.
- Sydney and Melbourne recorded -0.6% declines, driven by higher borrowing costs and increased housing supply.
- Perth (+2.1%), Brisbane (+1.1%) and Adelaide (+1.2%) continued to grow, supported by tighter supply and stronger affordability dynamics.
- Demand remains strongest in lower-priced segments, with first-home buyers helping stabilise parts of the market despite broader headwinds.
Foreign ExchangeAustralian dollar holds firm amid cross-currents
- The Australian dollar is trading near multi-year highs around 0.71, despite some recent softness.
- Inflation is a key driver. Headline CPI at 4.6% above the RBA’s target band, while core inflation remains sticky at 3.3%.
- Markets are pricing a high probability of a 25bp rate increase, helping underpin the currency.
- Geopolitical risk is limiting upside. Ongoing Middle East tensions, particularly around energy supply routes, have driven a more defensive global market tone.
- Policy divergence supports relative AUD strength: Australia leaning toward further tightening while major economies pause.
Sources: Westpac Weekly (27 April), ABS, Macrobond, Westpac Economics, ANZ-Roy Morgan, Cotality, Trading Economics. This summary is for informational purposes only and should not be considered financial advice.