Australia’s monthly inflation rate stayed flat in April, but not without fresh warning signs for policymakers and businesses alike.
Data from the Australian Bureau of Statistics showed that the Consumer Price Index (CPI) rose 2.4% from a year earlier, slightly above economists’ forecasts of 2.3 per cent. The trimmed mean CPI, a more stable measure that excludes volatile items, edged up to 2.8 per cent from 2.7 per cent in March.
This marks the third consecutive month that headline inflation has stayed at 2.4 per cent, comfortably within the Reserve Bank of Australia’s (RBA) 2 to 3 per cent target range. Still, the uptick in core inflation suggests that the path to price stability may be uneven.
The RBA had anticipated more easing in 2025, cutting the cash rate to 3.85 per cent last week in its second move this year. But the latest data, coupled with global economic uncertainty, could complicate that trajectory.
Markets steady but central bank cautious
Josh Gilbert, Market Analyst at eToro, said the inflation data reinforces why the RBA remains cautious. He acknowledged the rise in the trimmed mean but warned against alarmism. “This isn’t a reason to panic; inflation doesn’t just move in a straight line,” he said, adding that a July rate cut is “certainly not nailed on.”
Gilbert noted that while inflation remains inside the RBA’s target band, the case for back-to-back cuts is weakening. “The upside risks are clearly receding,” he said, referencing market expectations for up to three more rate cuts this year. Yet, geopolitical factors, like Donald Trump’s trade stance, continue to loom.
“Trump’s tariff turmoil has every central bank on watch,” Gilbert said, though he added that recent signs of a truce may ease some of the pressure.
No major shift for property outlook
Matt Bell, Chief Economist at Oliver Hume Property Group, said April’s inflation result surprised slightly on the upside, with monthly CPI rising 0.8 per cent to deliver an annual rate of 2.4 per cent, just above market forecasts of 2.3 per cent. “The trimmed mean estimate was also up from 2.7 per cent to 2.8 per cent,” he said.
Bell pointed to dwelling prices and medical and hospital services as key drivers of the upside surprise, while goods inflation fell and services inflation ticked up for the second month in a row.
“Before the meeting, markets had priced in a 74 per cent chance of a July rate cut. Half an hour after the release, the market had eased the chance to 63 per cent, a small repricing of expectations,” he said. Still, Bell added, “three further rate cuts in total are still forecast for the remainder of 2025.”
According to Bell, the slightly hotter print is unlikely to change much in the near term for home buyers. “So no material change in the outlook for rate cuts for the rest of the year, or their impacts on property markets. Mortgage holders and purchasers can still expect some relief or a boost to their purchasing power by Christmas,” he said.
Employers eye wage gains but warn of weak productivity
Ben Thompson, CEO of Employment Hero, took a broader view of the inflation picture, suggesting that while prices aren’t spiralling, they continue to stretch household budgets. He highlighted that “many Australians won’t feel relief until inflation comes down more meaningfully.”
Thompson offered a silver lining, his firm’s data shows solid wage growth. Median hourly pay rose 1.8 per cent from March and 5.9 per cent over the past year. Gains were especially strong among casual and young workers, with the construction sector posting an 8 per cent year-on-year jump. These trends, he said, are encouraging for lower-paid sectors.
However, he warned that productivity is not keeping pace. “Productivity was abysmal in April, dipping 1.7% from March,” Thompson noted. Without a rebound, wage growth could ultimately feed inflation rather than improve living standards. “Unless productivity rebounds, wage gains will become pressure points not progress.”
Small business still seeking breathing room
Kyle Willersdorf, ANZ Account Director at GoCardless, acknowledged that the inflation result was only a minor deviation from expectations but flagged concerns for smaller firms. “Today’s result isn’t exactly what small businesses were hoping for,” he said. Many were hoping for a clearer path to rate relief after enduring two hikes already this year.
Still, Willersdorf remains optimistic about stabilising conditions. He encouraged businesses to use this period to improve resilience. “Using this relief period to integrate automated payment systems now means businesses can keep their revenue secure while taking more advantage of growth opportunities,” he said.
Core inflation may be levelling above forecasts
Ivan Colhoun, Chief Economist at CreditorWatch, said the data suggests inflation may be settling around 2.75 per cent, higher than the RBA’s forecast of 2.6 per cent. He believes the rate outlook still leans toward easing, but consecutive cuts are less likely given persistent cost pressures and trade risks.
Colhoun highlighted that while goods inflation is moderating, thanks to stable housing and lower petrol prices, services inflation remains sticky. “The cost of living and of doing business remains high and isn’t falling, just rising at a slower rate,” he said. That, he added, will likely keep insolvencies elevated even if rates fall.
The latest inflation print underscores the balancing act faced by RBA Governor Michele Bullock and her team. While recent cuts signal confidence in the economic trajectory, the sticky core inflation and international headwinds, especially around tariffs, suggest policymakers will proceed with caution.
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