Australia’s inflation expected to peak at 4.25%

[SYDNEY] Australia’s headline inflation is expected to peak around 4.25 per cent mid-year, lower than previously forecast, as falling oil prices help reduce inflationary pressures, Treasurer Jim Chalmers said.

Lower oil prices and progress in Middle East peace talks helped accelerate progress, Chalmers said on the Insiders programme on Sunday (Jun 28).

“We desperately need the ceasefire to stick,” Chalmers said. “We can’t have another false dawn when it comes to the Middle East and particularly the Strait of Hormuz.”

Treasury figures from the May Federal Budget had forecast the headline figure to be 5 per cent through the June quarter, before declining to 2.5 per cent by mid-2027.

“There’s still more inflation than we would like in our economy,” as a consequence of uncertainty in the Middle East, he said. “But we are making more progress than we anticipated.”

Chalmers would not comment on expectations for underlying inflation, which the Reserve Bank of Australia watches closely when setting rates, but said it was also moving “ahead of schedule,” with an update to Treasury forecasts to be provided mid-year.

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Underlying inflation, the trimmed mean gauge of annual consumer-price growth, which shaves off volatile items, rose 3.6 per cent, versus economists’ estimate of 3.5 per cent, data from the Australian Bureau of Statistics showed Wednesday. The annual headline figure rose 4 per cent, below economists’ forecast for 4.3 per cent.

Australia’s central bank lifted interest rates three times this year, taking the cash rate to 4.35 per cent, before pausing at its June meeting. BLOOMBERG