Australia’s consumer price index (CPI) is expected to remain stubbornly high when April data is released next week, with market economists forecasting annual headline inflation between 3.5% and 4.2%—well above the Reserve Bank of Australia’s (RBA) 2–3% target band. The monthly CPI indicator, compiled by the Australian Bureau of Statistics (ABS), is projected to show a 0.6% month-on-month increase, putting the annual rate at around 3.8–4.0%, depending on the survey.
Key drivers include sustained upward pressure from housing (rents and new dwelling prices), insurance premiums, education, healthcare, and services costs. While goods inflation has moderated, services inflation remains sticky due to strong domestic demand and rising labor costs. Electricity prices, partially offset by government rebates, are still contributing.
Financial markets have already dialed back rate cut expectations. After a surprise 3.5% March CPI print, the probability of an August rate reduction fell from 70% to below 40%, and swaps now imply only a 30% chance of a cut by November 2025. A high April reading could push any easing into 2026.
RBA Governor Michele Bullock has repeatedly warned the board will not hesitate to raise rates further if inflation proves more persistent than anticipated. Most analysts, however, expect the RBA to hold the cash rate at 4.35% until at least two more quarterly CPI prints confirm a downward trend.
For households, the persistent inflation means extended cost-of-living pressure, with variable-rate mortgage holders facing high repayments and renters seeing no relief. Small businesses grapple with elevated input costs and cautious consumer spending. While wage growth has picked up, real wages are still declining when adjusted for inflation.
Investors will closely scrutinize the April CPI release for clues on the RBA’s next move. A higher-than-expected print could trigger a bond sell-off and a rally in the Australian dollar, while a softer reading might revive hopes for an earlier rate cut. For now, the path back to the RBA’s target remains bumpy, and the central bank is likely to retain a hawkish tone, delaying any interest rate relief.
