The monthly consumer price index (CPI) indicator rose 2.4 per cent in the 12 months to April 2025, according to the latest data from the Australian Bureau of Statistics (ABS).
This figure was above consensus, which put CPI at 2.3 per cent.
“Annual CPI inflation has been steady at 2.4 per cent for the past three months,” said Michelle Marquardt, ABS head of prices statistics.
The largest contributors to the annual movement were food and non-alcoholic beverages (+3.1 per cent), housing (+2.2 per cent), and recreation and culture (+3.6 per cent).
Annual trimmed mean inflation was 2.8 per cent in April 2025, up slightly from the 2.7 per cent inflation in March, but has remained relatively stable for the past five months.
“The CPI excluding volatile items and holiday travel measure rose 2.8 per cent in the 12 months to April, compared to a 2.6 per cent rise in the 12 months to March,” Marquardt said.
Annual housing inflation was 2.2 per cent in April, up from 1.8 per cent in March, while new dwelling prices rose 1.2 per cent, up slightly from 1.0 per cent in March, but remained subdued amid builder discounts, marking the second-lowest annual increase since April 2021.
Electricity prices fell 6.5 per cent in the year to April, easing from a 9.6 per cent drop in March, as government rebates continued to help lower household costs.
Has disinflation stalled?
Commenting on the latest data, Paul Bloxham, chief economist at HSBC, said the numbers imply “a bit less disinflation” than the central bank is projecting.
“The main one of relevance is the monthly trimmed mean indicator, which rose slightly … The other measure that should be in focus is the CPI excluding volatile items and holiday travel, which also picked up pace,” Bloxham said.
“The RBA is forecasting that the quarterly trimmed mean will fall to 2.6 per cent YoY in Q2. To get this result requires that it falls from 2.9 per cent YoY in Q1, and means the trimmed mean needs to slow from 0.7 per cent QoQ in Q1 to 0.6 per cent QoQ. While today’s figures are only a partial reading, a 2.8 per cent YoY on the monthly trimmed mean suggests the next couple of readings clearly need to weaken.”
HSBC’s view, he said, is that weak productivity will continue to support a cost base that is still rising too quickly to be consistent with the RBA’s 2.5 per cent inflation target.
This, he noted, makes it difficult to get core inflation to sustainably fall to the mid-point, or below the mid-point, of the RBA’s target band.
“We expect the RBA will continue to move cautiously with rate cuts, with cuts delivered once a quarter, most likely after the quarterly CPI prints. Our central case has 25 bp cuts in Q3 2025, Q4 2025 and Q1 2026 taking the cash rate down to 3.10 per cent by early 2026,” Bloxham said.
For CBA’s Stephen Wu, the main surprise was the “unexpected increase in new dwelling costs”.
“Since August last year, a clear downtrend had been sustained as home builders have responded to weak demand by offering promotions and incentives. But with the start of the RBA’s interest rate cutting cycle since February, expectations around home price growth have sharply increased,” the senior economist said.
According to Wu, so far there’s been “no smoking gun” for the RBA to deliver another 25 bp cut at its July meeting.
“We maintain our base case that the RBA will want to deliver further cuts in a cautious way, and that the domestic data for now will evolve in such a way to enable that,” he said.
“Upcoming Q1 25 GDP data and early Q2 reads on spending will be key, together with labour market data,” Wu added, while acknowledging that the global growth outlook presents ongoing significant downside risks.
Though CPI exceeded Westpac’s forecast of a 1.9 per cent increase, senior economist Justin Smirk said there’s “no compelling reason” to change the bank’s June quarter estimates of 0.8 per cent quarterly and 2.2 per cent yearly for headline CPI, and 0.6 per cent quarterly and 2.7 per cent yearly for trimmed mean.
Meanwhile, VanEck senior portfolio manager Cameron McCormack said: “Today’s CPI release shows progress towards curbing inflation has continued to stall.”
Despite the RBA’s dovish stance last week, McCormack said services inflation remains stubbornly high, driven by low unemployment and elevated wage growth.
“Stickiness in the services component makes consistent price deflation across categories very difficult. We are also conscious that the cost savings on electricity from government rebates are starting to wear off, with prices inching up since last month. Higher power bills will impact businesses, with additional costs passed onto consumers,” the portfolio manager said.
Moreover, he cautioned domestic inflationary pressures could be exacerbated by global price increases as US tariffs start to make more of an impact on global supply chains, and geopolitical conflicts threaten to increase the price of commodities and other goods in the near future.
“This reinforces our forecast of a shallower easing cycle than what the market is pricing of three rate cuts by year end,” McCormack said.
Like McCormack, ANZ’s economists declared “Australian disinflation has stalled”.
“All three measures, including the headline monthly CPI indicator, monthly CPI excluding volatile items and holiday travel as well as annual trimmed mean have all been shuffling sideways for the past few months,” they said.
Earlier this week, ANZ revised its cash rate outlook, now expecting a 25 basis point cut in August and another in the first quarter of 2026, dropping its earlier forecast of a July rate cut.
