Inflation rose 1.4 per cent in the first three months of 2023, to remain at 7 per cent for the past 12 months.
But consumer prices as measured by the Australian Bureau of Statistics are growing more slowly than in the December quarter, when a 7.8 per cent yearly increase was recorded.
ABS head of price statistics Michelle Marquardt said the March rate was the lowest quarterly rise since December 2021.
“While prices continued to rise for most goods and services, many of these increases were smaller than they have been in recent quarters,” she said on Wednesday.
Consensus expectations were for a 6.9 per cent rise in headline inflation in the year to March.
The quarterly inflation numbers will set the scene for another finely balanced cash rate decision next week.
The Reserve Bank started hiking interest rates in May last year to bring down rising inflation. After 10 consecutive raises, it decided to hold steady at 3.6 per cent earlier in April.
In recent communications, central bank officials have made it clear the board is prepared to hike again if the incoming data undermines its pathway to returning inflation back within its 2-3 per cent target range.
EY Oceania chief economist Cherelle Murphy said continued demand for labour and the increasing likelihood of wage rises would also weigh on the RBA board’s decision.
“The number overall is still too strong for the Reserve Bank’s liking,” she told the ABC.
“I wouldn’t say the Reserve Bank could be so comfortable with this that they won’t raise rates again. That is probably more likely than not.”
However, Ms Murphy said the pace of rate rises was likely to ease through the rest of 2023.
“If we get more rate hikes this year, it probably is only one or two. We have to remember the Reserve Bank has put a lot of rate hikes in place over the last 12 months. Anyone with a mortgage doesn’t need reminding of that. It is coming towards the end of its cycle,” she said.
“It is now getting slightly trickier for the Reserve Bank to read the economy because it has tried to consider everything that has been put in place, what the impacts will be going forward and where we are now.”
The RBA board next meets on Tuesday.
– with AAP
