Australian Inflation Steady in April, Rate Cut Hopes Intact

Australia’s consumer inflation held steady in April, as rising health and travel costs offset falling petrol prices, reinforcing expectations for future interest rate cuts. The Australian Bureau of Statistics reported a 2.4% year-on-year increase in the consumer price index (CPI), matching March’s reading and slightly above the 2.3% forecast.

Core inflation also edged higher, with the trimmed mean rising to 2.8% from 2.7%, and a measure excluding volatile items and holiday travel also climbing to 2.8% from 2.6%. Despite the uptick, all metrics remained within the Reserve Bank of Australia's (RBA) 2–3% target range.

Markets showed a muted response, as the monthly CPI covers only a partial basket—primarily goods, not services. Goods prices increased just 0.9% year-on-year. The Australian dollar held steady at $0.6440, and three-year bond futures were flat at 96.60.

EY chief economist Cherelle Murphy noted that the data is not a full reflection of broader price pressures, adding that the RBA may continue easing policy amid diminished inflation risks and ongoing global uncertainty.

Interest rate futures show a 65% chance of a rate cut at the RBA’s July meeting, with expectations rising further for August after the release of Q2 CPI data.

Last week, the RBA cut rates to a two-year low, citing subdued inflation and global trade concerns. Meanwhile, Australia’s job market remains resilient with the unemployment rate at 4.1%, though modest wage growth limits inflationary pressure.

In April, health costs rose 4.4%, driven by insurance premium hikes, while holiday travel and accommodation surged 5.3%. Fuel prices dropped 12%, electricity fell 6.5% due to rebates, and rent growth slowed to 5.0%—its lowest rate since February 2023.