The Royal Bank of Canada (RBC) has offices here in Australia and contributes regularly to the national economic conversation.<\/p>\n
In its latest public note, it’s added another RBA interest rate hike to its monetary policy forecast.<\/p>\n
It’s also predicting Australian inflation to surge.<\/p>\n
A reacceleration in headline inflation is inevitable.<\/p>\n
Automotive fuel is a significant component of the Aussie CPI basket, with a weighting of 3.35%.<\/p>\n
Under the assumption Brent prices are close to USD90 a barrel by end-26 and USD75 by end-27 (slightly above market pricing but in line with our global commodity team forecasts), we expect y\/y headline CPI inflation to hit a peak of 6% in monthly terms in June and 5.6% in quarterly terms in 4Q.\u00a0<\/p>\n
This is principally due to the direct impact of higher fuel prices but also a wide range of spillovers.<\/p>\n
Prices for urea and fertiliser will also feed through to food price inflation. The question is, what\u2019s the risk of leakage?<\/p>\n
We think it\u2019s likely that measures of core inflation will strengthen as well.<\/p>\n
According to the NAB monthly business survey, input costs surged in March by the most on record, from 1.3% to 3% in quarterly equivalent terms. Final product price growth also increased in the month, up 1.1%, a smaller but still significant magnitude.<\/p>\n
Weaker reported profitability means businesses are absorbing the higher costs by some degree. But margin pressures are intensifying. And with a shock as large as the one we are facing, the risk of pass-through is higher.<\/p>\n
At the same time, household balance sheets entered 2026 in a relatively strong state. Real disposable income per capita rose steadily in 2025 as inflation and interest rates declined. Households were also in a savings state of mind. Buffers were being rebuilt with the household saving ratio climbing to 6.9% at the end of last year \u2013 a decent recovery from the 1.9% covid lows.<\/p>\n
Unemployment holding at historically low levels has also been another key support. Given the starting point, second-round effects will be more of a challenge to contain.<\/p>\n
We expect trimmed mean inflation to climb to 4.2% by 1Q-27 with a peak of around 1.1% in q\/q terms in the second half of this year.\u00a0<\/p>\n
We don\u2019t expect a return to the band until 2028.<\/p>\n","protected":false},"excerpt":{"rendered":"The Royal Bank of Canada (RBC) has offices here in Australia and contributes regularly to the national economic…\n","protected":false},"author":2,"featured_media":602348,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[2001,64,63,166,2009,99,2005,160,2010,2006,2002,1491],"class_list":{"0":"post-612231","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business","8":"tag-asx","9":"tag-au","10":"tag-australia","11":"tag-australian-dollar","12":"tag-bitcoin","13":"tag-business","14":"tag-dow-jones","15":"tag-live-blog","16":"tag-live-update","17":"tag-nyse","18":"tag-share-market","19":"tag-wall-street"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/612231","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=612231"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/612231\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/602348"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=612231"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=612231"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=612231"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}