Latest official data shows Australia’s inflation has risen to 4.6% year-on-year in March, the highest level since 2023, driven by a sharp increase in global energy prices and signalling renewed inflationary pressure.
The statistics bureau said transport prices surged 8.9%, mainly due to higher fuel costs, which have been linked to supply disruptions caused by geopolitical tensions in the Middle East. Markets broadly expect the Reserve Bank of Australia to raise interest rates again at its next meeting, with a probability of over 70%. Some economists forecast a 25-basis-point hike, which would lift the cash rate to 4.35%.
Since the outbreak of conflict in the Middle East, shipping through the Strait of Hormuz has come under pressure, affecting around 20% of global oil and gas transport. This has pushed international oil prices from around US$70 per barrel to above US$110, where they remain elevated. Analysts say the full impact of higher energy prices has yet to flow through the economy, with further effects expected in the coming months across fertiliser, metals, and manufacturing supply chains.
Economists also warn that, beyond energy costs, the gradual removal of electricity subsidies will further increase household expenses, with power prices potentially rising by around 20% in the short term, adding further inflationary pressure.
Some institutions caution that continued rate hikes will increase mortgage burdens and raise the risk of loan defaults.
Currently, more than 1.4 million Australian mortgage holders are classified as high-risk, reflecting growing financial stress under rising interest rates. Markets expect further monetary tightening to remain likely if inflation does not ease.