Australia\u2019s inflation rate will fall in April, thanks to the government temporarily pausing a tax excise, but it is unlikely to stop the Reserve Bank raising interest rates again this year.<\/p>\n
Ahead of Wednesday\u2019s official inflation rate, three of the big four banks \u2013 Commonwealth, National Australia Bank and ANZ \u2013 have all tipped the consumer price index to slide from 4.6 per cent recorded in March.<\/p>\n
Experts forecast the headline inflation rate to come in at between 4.3 to 4.4 per cent. <\/p>\n
But the all important trimmed mean inflation rate \u2013 which removes volatile and seasonally adjusted items \u2013 will continue to rise to 3.4 per cent.<\/p>\n
AMP chief economist Shane Oliver told NewsWire households won\u2019t be hit with a rise in the cash rate \u2013 currently at 4.35 per cent \u2013 after the RBA\u2019s next board meeting on June 15-16. <\/p>\n
\u201cI think the Reserve Bank will hold for the simple reason they\u2019ve already hiked for three meetings in a row and they now judge \u2013 as per the minutes last week \u2013 that monetary policy is restrictive,\u201d he said.<\/p>\n
\u201cBut we are still allowing for another rate hike in August because even if the US-Iran war has ended we still will have capacity pressures in the economy and underlying inflation is still too high, which will tip the RBA into one more hike.\u201d <\/p>\n
Money markets are currently predicting just a 9 per cent chance for interest rates to rise in June, but are expecting a greater than 50 per cent chance of rate pain by September. <\/p>\n
Why will inflation slow in April<\/p>\n
The cost of living pain is tipped to temporarily slow in April, largely thanks to the government cutting taxes on fuel. <\/p>\n
Australia\u2019s inflation story has largely been driven by rising fuel prices in recent months due to the US-Iran war.<\/p>\n
Before the Middle East conflict, oil prices were about $US56 ($A78) per barrel in January, before temporarily touching $US120 (A$167) per barrel.<\/p>\n
The price of fuel continued to fluctuate throughout April before cooling closer to $US110 ($A153) a barrel. <\/p>\n
For every $10 increase in the price of oil, Australians pay an extra 10 cents at the fuel pump.<\/p>\n
Helping to ease some of the inflationary impacts of the war was the federal government\u2019s decision to halve the fuel excise and temporarily pause the GST windfall on rising fuel.<\/p>\n
This saved motorists 26 cents a litre, directly through the fuel excise and around 5.7 cents a litre through returning the GST. <\/p>\n
But that excise cut is scheduled to come off on July 1, with the Albanese government refusing to say if it will be extended.<\/p>\n
Mr Oliver predicts inflation to moderate slightly in April, with fuel taking around 1 per cent off the inflation rate.<\/p>\n
But this will be offset from rises across the economy. <\/p>\n
\u201cThere are some things that will have solid increases in the month of April \u2013 things like a seasonal rise in domestic and international travel prices, private health insurance premiums and clothing and footwear prices will be up solidly,\u201d he said.<\/p>\n
\u201cSo even though transport prices will probably be down due to the fuel excise and GST reductions, it will be offset by these things.\u201d <\/p>\n
y<\/p>\n
Attention turns to underlying inflation<\/p>\n
EQ Economists managing director Warren Hogan says the central bank will largely ignore any rise in headline inflation.<\/p>\n
Instead, he says the central bank will be closely watching the trimmed mean inflation rate. <\/p>\n
\u201cThis is where our vulnerability is because we didn\u2019t get inflation under control prior to the conflict and because we learnt inflation was picking up last year,\u201d he told Sky News. <\/p>\n
\u201cWe are really not sure how much the initial energy shock will filter through the economy.<\/p>\n
\u201cThat is the key for the RBA, they will look through one-off hits to inflation, but it is what filters through.\u201d<\/p>\n
Mr Hogan warned Australia would likely be hit harder by the energy shock crisis in the Middle East compared with the rest of the world, largely due to having a higher inflation rate heading into the conflict.<\/p>\n
\u201cThe reality is we are nowhere near getting inflation under control, it could be quite a problem if Wednesday\u2019s number reveals what we suspect and there is an inflation pulse running through the economy,\u201d he said.<\/p>\n
\u201cIn the absence of a downturn in the economy, I think they are going to have to raise rates again \u2013 and probably a few times \u2013 so why not just get on with it.\u201d<\/p>\n
\u201cWe know the current cash rate of 4.35 per cent which is where we got to in 2024 didn\u2019t get inflation under control then, so what\u2019s to say it is going to get it down now.\u201d<\/p>\n