A larger-than-expected rise in prices was recorded last month, with consumers slugged with higher prices for essentials like groceries and health.

For the second month in a row, the Australian Bureau of Statistics’ monthly consumer price index clocked a small increase.

The 3.6 per cent growth in consumer prices logged in the 12 months to April is faster than the 3.5 per cent in the year to March, and keeps inflation edging further away from the Reserve Bank’s target range of two per cent and three per cent.

Yet the monthly index is more volatile and less comprehensive than the quarterly version, which the RBA will put more weight on when it’s released in late July

Still, monthly inflation coming in a little above the 3.4 per cent pencilled in by economists adds to the case that interest rate cuts are not coming any time soon.

Wednesday’s data had fruit and vegetables recording their largest rise in a year as bad weather battered crops.

Health costs also accelerated, lifting 6.1 per cent in the 12 months to April from 4.1 per cent in the year to March, reflecting a rise in health insurance premiums from 1 April.

Rents are still rising strongly as vacancy rate s remain low but the pace of growth moderated a little, to 7.5 per cent in the 12 months to April, down from 7.7 per cent in March.

Betashares chief economist David Bassanese said the higher-than-expected monthly inflation outcome was disappointing against the backdrop of still quite weak consumer spending.

Mr Bassanese said the disinflationary process in Australia appeared to have stalled so far this year after encouraging declines over 2023.

“With consumer spending already weak, lingering inflationary pressures in Australia appear to largely reflect cost-push factors in areas such as housing, insurance, and energy which interest rates can’t really contain,” he wrote in a note.

The RBA may be concerned about inflation staying uncomfortably high, the economist said, which could risk the inflation expectations becoming entrenched.

“Indeed, although consumer spending by domestic residents is weak, the RBA has noted the overall economy is still operating at a high level of capacity – due to the surge in immigration and the public infrastructure investment boom,” he said.

 

Poppy Johnston
(Australian Associated Press)