Australia’s April inflation figures are expected to show price pressures broadening across the economy, reinforcing concerns the Reserve Bank may face a more persistent inflation problem. This could be the case despite temporary fuel price relief helping ease headline consumer prices.
Economists from the major banks expect the monthly CPI indicator, due this week from the Australian Bureau of Statistics, to show headline inflation moderating from March levels as the federal government’s temporary fuel excise cut flowed through to petrol prices and some states introduced free public transport measures.
Underlying inflation, however, is tipped to remain stubbornly elevated as businesses increasingly pass higher costs on to consumers.
Westpac has forecasted headline inflation to rise 0.9 per cent in April, lifting the annual pace to 4.8 per cent, while trimmed mean inflation is expected to accelerate to 3.5 per cent year-on-year.
Meanwhile, the Commonwealth Bank of Australia (CBA), ANZ and NAB each expect trimmed mean inflation to print at 3.4 per cent annually, even as headline inflation eases towards the low-4 per cent range.
The data is shaping as a key test for policymakers after March inflation figures suggested the initial impact of the Middle East conflict had largely been confined to fuel costs.
As a result, economists now believe the second-round effects are beginning to emerge more clearly across groceries, construction materials, transport and services.
Westpac economist, Neha Sharma, said signs of broader pass-through were already becoming evident in business surveys and supplier pricing data.
“The April NAB Business Survey showed a further intensification in cost pressures, with purchase cost growth matching last month’s record and lifting the quarterly pace to 4.5 per cent [per quarter],” Sharma said.
“Selling prices also saw its sharpest increase since July 2022, suggesting a broader pass-through is beginning to emerge.”
CBA senior economist, Trent Saunders, said the key uncertainty was how aggressively businesses had responded to rising input costs.
“The risks to underlying inflation in April are also to the upside,” Saunders said, pointing to mounting pressures in construction costs and private health insurance premiums.
Food prices are expected to attract particular scrutiny after supermarkets and hospitality venues began warning of higher operating costs.
Westpac said anecdotal evidence suggested some food outlets had already introduced fuel surcharges, while ANZ noted home-brand milk prices had risen in late April alongside increasing costs for fertiliser, plastics and transport.
Housing inflation is also expected to remain firm, with higher building material costs continuing to filter through the economy.
CBA said plumbing suppliers had announced price increases above 12 per cent in April, while Westpac pointed to sharp increases in construction material notifications and upstream supplier costs.
Private health insurance premium increases are expected to drive another sharp rise in health costs after the government approved an average 4.41 per cent increase from 1 April, the largest rise since 2017.
Both Westpac and ANZ expect health prices to rise 1.9 per cent during the month.
While fuel prices are expected to provide some short-term relief, economists cautioned the improvement may prove temporary.
NAB noted the 32 cent per litre fuel excise reduction would unwind in July, while Westpac warned diesel price increases continued to pose risks for freight, construction and supply chains.
The inflation data will land just weeks before the Reserve Bank’s next policy meeting, with markets watching closely for signs underlying inflation pressures are becoming more entrenched across the broader economy.
