Price inflation across Australia appears to have softened according to new data from the Australian Bureau of Statistics (ABS), but economists are not celebrating.
According to ABS data, the Consumer Price Index (CPI) rose 4.2 per cent in the 12 months to April 2026, which is down from 4.6 per cent in the year to March 2026.
Housing, which is the highest weighted group in the CPI, was the largest contributor to annual inflation in April, with a rise of 6.3 per cent. This was followed by a 6.6 per cent rise in transport, easing from an 8.9 per cent rise in March. Transport is heavily affected by the rising oil prices.
Despite the cooling, KPMG chief economist Dr Brendan Rynne said core inflation still remains stubbornly high. On top of this, trimmed mean inflation – a measure that the Reserve Bank of Australia is more concerned about, which rubs out significant fluctuations to show underlying movements – is still above its targeted band of 2-3 per cent inflation, sitting at 3.4 per cent. That is up from 3.3 per cent in the 12 months to March.
“What is most concerning in today’s data is the fact that core inflation remains stubbornly high, ticking up albeit slightly yet again, despite several successive interest rate rises already this year,” Dr Rynne said.
While transport and housing drove the overall lift, clothing and footwear came in third in terms of price growth, lifting 5.9 per cent in the year to April. This is down from 7.1 per cent in the year to March.
The lowest category growths are communications (up 1.5 per cent) and furnishings, household equipment and services (up 1.2 per cent).
Dr Rynne pointed out that as many as six of the 11 CPI groups are still above 3 per cent, and showing no signs of shifting anytime soon.
“So despite headline inflation numbers falling, price growth remains far too high in the Australian economy and we are likely to see at least one more interest rate rise in the very near future to help continue to put downward pressure on demand,” Dr Rynne said.
“Fuel and public transport costs are also being artificially lowered by government interventions to help mitigate the rising cost of oil associated with the Middle East conflict, while the overhang of the electricity rebates working its way out of the system is also holding up headline inflation by around 0.4 of a per cent.
“This is making it difficult for the RBA to get a read on the numbers at this point and could hint at a notable rise in petrol prices in the months ahead, fuelling inflation even further now the government’s help has tapered off.”
Dr Rynne also noted that oil price spikes tend to work their way through an economy on a staggered basis.
“Prices escalate immediately for fuel costs, so direct transport costs increase usually within the month of the price shock; food costs tends to follow as they incur the fuel cost rise faster than other sectors (as their product turnover is the fastest of all FMCG sectors), then manufacturing and construction within the next three months, followed by the rest of the economy within six months till whenever the shock dissipates.”
Interestingly, of the 11 groups in the CPI, seven experienced a slowdown in annual growth from last month with transport prices moderating the most.
“Automotive fuel prices fell 7.0 per cent from March to April, after rising by 32.8 per cent in the previous month,” ABS head of prices statistics Sue-Ellen Luke said. “The fall this month includes the halving of the fuel excise on 1 April.
“Automotive fuel prices are still 23.5 per cent higher compared to February and before the impact of the Middle East conflict.”
Luke added that the impact of higher oil prices has also been seen in products and services with high freight and logistics costs, such as parcel delivery and building materials.
“This is reflected in price increases of 12.4 per cent for postal services and 4.7 per cent for new dwelling construction compared to 12 months ago,” Luke said.
Average prices for regular unleaded petrol fell 10 per cent, falling from 228 cents per litre in March to an average price of 206 cents per litre in April. Premium unleaded fell 9 per cent between March and April, with average prices falling to 228 cents per litre.
Diesel had a 14 per cent rise in average price, rising from 256 cents per litre in March to 292 cents per litre in April, notwithstanding the excise cut.
Annual housing inflation was 6.3 per cent in the 12 months to April. This reflects rising costs for electricity, new dwellings and rents.
Electricity costs are 22.5 per cent higher than 12 months ago as Commonwealth and State government rebates that reduced electricity costs for households are no longer in place.