Australian inflation numbers have hit a new high in 2026, as analysts project possibilities for a cash rate hike next week by the Reserve Bank of Australia.
New numbers from the Australian Bureau of Statistics (ABS) show the Consumer Price Index (CPI) rose 4.6 per cent in the 12 months to March 2026.
This is up from 3.7 per cent annual inflation to February 2026, with ABS head of prices statistics Sue-Ellen Luke adding this is the highest it’s been since September 2023.
Housing, which is the highest weighted group in the CPI, was the largest contributor to annual inflation in March, with a rise of 6.5 per cent. This was followed by an 8.9 per cent rise in transport.
Clothing and footwear saw the second-largest percentage growth between February and March, with this sector up 7.1 per cent in March compared to 5 per cent in February.
In month-on-month terms, clothing and footwear saw deflation between February and March this year, down 1.9 per cent in original terms. It is the largest monthly deflation across all sectors.
The CPI monthly movement for March was 1.1 per cent, driven by transport which rose 9.2 per cent, due primarily to a 32.8 per cent monthly increase in automotive fuel prices.
When prices for some items change significantly, such as automotive fuel, measures of underlying inflation like the trimmed mean can give more insights into how inflation is trending.
Trimmed mean annual inflation was unchanged at 3.3 per cent in the 12 months to March 2026, which sits above the RBA target range of 2 to 3 per cent.
Transport rose 8.9 per cent in the 12 months to March, compared to a small fall in the 12 months to February.
“Automotive fuel prices rose 32.8 per cent from February to March, which pre-dates the halving of the fuel excise on 1 April,” Luke said. “The increase in March is the largest monthly increase since the series began in 2017, reflecting the impact of the conflict in the Middle East on fuel prices.”
Average prices for regular unleaded petrol rose 33 per cent, increasing from 171 cents per litre in February to an average price of 228 cents per litre in March. Premium unleaded rose 30 per cent between February and March, with average prices rising to 250 cents per litre.
Diesel, which contributes ten per cent of the automotive fuel expenditure class, had a 41 per cent rise in average price, increasing from 181 cents per litre in February to 256 cents per litre in March.
Annual Housing inflation was 6.5 per cent in the 12 months to March. Electricity costs are 25.4 per cent higher than 12 months ago as Commonwealth and State government rebates that reduced electricity costs for households are no longer in place.
This all comes as many economists expect a cash rate hike of 25 basis points next week, including from ANZ economist Sophia Angala.
A recent release by research firm Roy Morgan showed that its Inflation Expectations survey increased sharply since the United States and Israel began attacking Iran on the last day of February. Roy Morgan CEO Michele Levine said it has increased 1 percentage point in the month of March to 6.3 per cent, and is now up a further 0.3 per cent to 6.6 per cent in late April.
“In fact, weekly Inflation Expectations hit a record high of 7.3 per cent in late March, and 7.2 per cent in early April, at the time the Albanese Government reacted to rising fuel prices by cutting the fuel excise in half – a drop of over 26 cents per litre – in the first week of April,” Levine said.
“Average retail petrol prices hit a new record high of $2.53 per litre in late March – representing an increase of over 87 cents per litre since mid-February, up by 52.6 per cent in seven weeks. However, since peaking in late March, the cut in the fuel excise has led to a plummeting fuel price – now down over 60 cents a litre since late March (down 29 per cent).
“Even before the recent rapid increase in the average retail petrol price, official estimates of inflation in Australia were rapidly increasing, from a low of 1.9% in June 2025, up to 2.8% in July 2025, and now 3.7% in February 2026.
“The sharp rise in inflationary pressures in the broader economy during the last few months of 2025 – increasing by 1.8% points since June – led to the Reserve Bank’s decision to leave interest rates unchanged in late 2025 and increase interest rates by +0.25% to 3.85% in early February, and by another +0.25% to 4.1% in mid-March.
“Looking forward, the Reserve Bank meets next week to consider adjusting interest rates as the economy deals with the rapid spike in energy prices and record high Inflation Expectations which threaten a significant economic slowdown in the next few months if these high prices persist.”