Inflation has increased to a near three-year high, the Australian Bureau of Statistics (ABS) has announced.
Prices rose by 4.6% in the year to March, driven largely by the surging cost of fuel brought on by the conflict in the Middle East.
Petrol prices increased by 33% in March, following Iran’s closure of the Strait of Hormuz in response to U.S-Israeli attacks.
It comes less than a week before the Reserve Bank is due to hand down its next cash rate decision.
Inflation
Inflation measures changes in the price of goods and services over time.
The ABS calculates the inflation rate –also referred to as the Consumer Price Index (CPI) – by analysing prices across categories including food, housing, and transport. It is usually an annual rate.
The latest CPI data tells us that prices have increased on average by 4.6% over the past year, up from the 3.7% for the year to February.
“Annual CPI inflation is the highest it’s been since September 2023,” ABS head of prices statistics Sue-Ellen Luke said.
Why the increase?
Housing and transport were the biggest contributors to inflation in the 12 months to March 2026, according to the ABS.
Housing costs increased 6.5%, driven by rising electricity prices as federal, state, and territory power bill discounts elapsed.
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Transport costs (+8.9%) included the rising cost of fuel. Measured across the year, fuel got 24.2% more expensive.
From February to March 2026, the cost of fuel rose 32.8%.
Trimmed mean
The trimmed mean is often seen as a more accurate picture of how inflation is tracking. This is because it excludes volatile prices, such as petrol, to better understand longer-term changes in prices.
The trimmed mean for March was 3.3%, the same as February.
It is partly what the Reserve Bank of Australia (RBA) looks at to determine the cash rate.
The RBA's target range for the trimmed mean is 2-3%, meaning the rate is too high.
RBA
The latest ABS inflation data comes less than a week before the RBA next meets to decide the cash rate – what it charges banks for short-term loans.
Changes in the cash rate are usually referred to as changes to interest rates, because the cash rate affects interest rates across the economy, including home loans. The higher the cash rate, the more expensive it is to borrow.
The RBA uses the cash rate as a tool to fight rising inflation. If it deems inflation too high, it can increase the cash rate to try to limit spending.
