Treasurer confirms inflation peak

27 April 2023
| By Laura Dew |
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Treasurer Jim Chalmers has confirmed inflation has “passed its peak”, as data shows CPI inflation fell in the 12 months to the March quarter.

Data from the Australian Bureau of Statistics (ABS) showed CPI inflation was 7 per cent in the year to the March quarter, down from 7.8 per cent in the December quarter. 

Quarterly inflation increased by 1.4 per cent, the smallest quarterly increase since December 2021.

The most significant price rises were caused by medical and hospital services, tertiary education and household fuels.

“The latest ABS data confirms that inflation has passed its peak and is beginning to moderate,” Chalmers said. “While inflation is still unacceptably high, we welcome that some price pressures have started to ease.

“The drivers of the moderation in inflation were lower fuel prices from previous war-driven highs, easing vegetable prices from the floods and easing growth in the cost of new dwellings.

“We understand that households and businesses are under pressure from rising rates and higher prices brought about by the war in Ukraine, pressures on international supply chains and other challenges ignored for too long.”

This was echoed by Dwyfor Evans, head of APAC Macro Strategy at State Street Global Markets, who was of the view that inflation had peaked. 

“A generally weaker tone to Australian Q1 inflation. Most notably, the quarterly report of the closely watched trimmed mean indicator came in at its softest level since Q4 2021 and again alludes to a peak in Australian inflation,” he said.
 
“Although the absolute level of inflation remains markedly above the RBA target, the weaker series offers further evidence that the rate hiking cycle has likely come to an end, as alluded to in cash rate futures.”

However, Cameron McCormack, portfolio manager at VanEck, said he expected the latest data would indicate another rate rise of 25 basis points by the Reserve Bank of Australia (RBA) at its next meeting on 2 May. Rates had been raised for 10 consecutive months but the RBA opted to pause in April and hold them at 3.6 per cent.

“We expect the RBA will increase rates by 25 basis points at its May meeting. Strong labour force, retail sales and accelerating services inflation cement the case for a rate rise next month.

“There remains significant upside risk to further rate hikes by the RBA beyond any increase in March. We think markets are overestimating the likelihood of an RBA pivot.” 
 

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