March Quarter CPI — Key Numbers
Headline CPI: 4.6% year-on-year (up from 3.7%) — highest since September 2023 | Trimmed mean: 3.3% year-on-year, 0.8% quarterly | RBA target: 2–3% | Economists tipping May hike: 30 of 33
Australia's March quarter Consumer Price Index landed on 29 April with a bigger-than-expected jump. Headline inflation rose to 4.6% year-on-year — up sharply from 3.7% in the prior quarter — driven in large part by a fuel price surge following disruptions in the Strait of Hormuz. More critically for the RBA, the trimmed mean — the measure that strips out volatile items and is the Board's preferred guide — came in at 3.3% annually and 0.8% on a quarterly basis. That is well above the 2–3% target band and not falling. The RBA meets on 4–5 May, with a decision at 2:30pm on 5 May. Here is what the numbers mean, and what borrowers need to do right now.
What the Two Inflation Numbers Actually Mean
There are two figures that matter in every CPI release, and they tell different stories.
Headline CPI: 4.6%
This is the all-items figure — everything from petrol to groceries to rent. It jumped sharply this quarter, driven heavily by fuel. Automotive fuel rose approximately 33% in March alone, following Strait of Hormuz disruptions that spiked global oil prices. Electricity prices also rose 25.4% year-on-year, and housing costs — rents and new dwellings — remain persistently elevated.
The headline number is attention-grabbing, but the RBA knows that a fuel-driven spike can reverse. It does not make monetary policy on headline CPI alone.
Trimmed Mean: 3.3% (annually), 0.8% (quarterly)
This is the number the RBA actually watches. The trimmed mean removes the most extreme price movements in both directions — so fuel spikes and one-off discounts don't distort the picture. What remains is underlying, persistent inflation.
At 3.3% annually and 0.8% on a quarterly basis, the trimmed mean is not falling fast enough. It remains materially above the top of the RBA's 2–3% target band. For the Board, this is the argument for continuing to tighten.
What Drove Inflation This Quarter
| Category | Change (YoY) | Note |
|---|---|---|
| Automotive fuel | +33% (March) | Strait of Hormuz disruption; single largest contributor to headline spike |
| Electricity | +25.4% | Government electricity rebates expired; underlying price rise is 3.9% excluding rebate effect |
| Housing (total) | +6.5% | Rents +3.7%, new dwellings +4.5%; persistent pressure |
| Transport (total) | +8.9% | Includes fuel; also diesel +41% — largest monthly rise since 2017 |
| Food & non-alcoholic beverages | +3.1% | Moderating but still above target |
The fuel spike accounts for a large portion of the headline jump from 3.7% to 4.6%. The RBA will give weight to underlying services and housing inflation — both of which remain sticky — rather than the fuel-driven headline.
Where the Banks Stand Now
A Reuters poll of 33 economists conducted after the CPI release found 30 expect a 25bp hike on 6 May, taking the cash rate from 4.10% to 4.35%. That would be the RBA's third consecutive increase in 2026, following hikes in February and March.
Post-CPI Bank Forecasts
CBA, ANZ, NAB: All tipping a May hike to 4.35% as their base case | Westpac: Forecasts 4.35% in May, with further hikes taking the peak to 4.85% by August | Market pricing: 70–75% probability of a hike priced in | 3 of 33 economists: Hold at 4.10%
More than a third of all forecasters now see the cash rate reaching 4.60% or higher by end of 2026 — up from zero in the March poll. Westpac's 4.85% peak forecast was made prior to the CPI release and may be revised given the trimmed mean quarterly result came in below their pre-release forecast.
What a May Hike Adds to Your Repayments
A 25bp hike to 4.35% is modest in isolation — but this would be the third increase in three months. The cumulative effect since January 2026, when the cash rate was 3.60%, is now becoming material for household budgets.
Repayment Impact — Current Rate (4.10%) vs After May Hike (4.35%)
25-year principal-and-interest loan. Approximate figures — actual repayments vary by lender and remaining term.
| Loan balance | Today (4.10%) | After hike (4.35%) | Extra/month |
|---|---|---|---|
| $500,000 | $2,667 | $2,740 | +$73 |
| $700,000 | $3,734 | $3,836 | +$102 |
| $900,000 | $4,800 | $4,931 | +$131 |
| $1,000,000 | $5,334 | $5,480 | +$146 |
The Cumulative Impact Since January 2026
Each individual hike looks manageable on paper. The cumulative picture is different. The RBA was at 3.60% at the start of 2026. If May proceeds as expected, borrowers will have absorbed 75 basis points of increases in three months.
Total Repayment Increase — January 2026 (3.60%) to Post-May Hike (4.35%)
25-year P&I loan. Approximate figures.
| Loan balance | Jan 2026 (3.60%) | Post-May (4.35%) | Total increase |
|---|---|---|---|
| $500,000 | $2,530 | $2,740 | +$210/mo |
| $700,000 | $3,541 | $3,836 | +$295/mo |
| $900,000 | $4,552 | $4,931 | +$379/mo |
| $1,000,000 | $5,058 | $5,480 | +$422/mo |
A borrower with a $700,000 balance who was paying $3,541 a month at the start of 2026 will be paying approximately $3,836 — nearly $300 more every month — if May proceeds as forecast.
What Borrowers Should Do Before 6 May
- Check your current rate against market. Lenders pass rate hikes on within days of a decision. If you are already paying above the market rate for your loan type, you are compounding the damage. The time to negotiate or switch is before the hike is announced, not after.
- Run the numbers at 4.35%. Use our repayment calculator to model your exact repayment at 4.35%. If you are comfortable, no immediate action is needed beyond monitoring. If the number is tight, act now — not after the decision.
- Consider whether fixing makes sense. Fixed rates are priced on market expectations of future cash rates — which already include further hikes. Locking in now captures the current fixed rate market before any further repricing. Our fixed vs variable guide covers the key trade-offs.
- Think about the full trajectory, not just May. Westpac's pre-CPI base case had the cash rate reaching 4.85% by August — though that forecast may be revised following the actual trimmed mean result. Even so, the broader consensus across all four banks points to further hikes beyond May. A pause at some point is possible, but a reversal is not on the table.
- Don't wait for the announcement to call a broker. Brokers are flooded with calls in the 48 hours after a rate decision. Getting ahead of that queue — this week — means a faster, calmer conversation about your options.
Is the Fuel Spike a One-Off?
The 4.6% headline number will attract the most attention, but the RBA is unlikely to react to the fuel-driven component directly. Monetary policy works with a lag and cannot address a supply shock caused by geopolitical disruption. If Strait of Hormuz conditions normalise, fuel prices could reverse meaningfully in the June quarter — dragging headline CPI back down.
What the RBA will continue to watch is the trimmed mean. At 3.3% annually and 0.8% on a quarterly basis, it is not moving toward target fast enough. Services inflation — the hardest component to bring down — remains persistent. That is the argument that keeps rates rising regardless of what petrol does.
There is one additional forward-looking factor: the federal government's fuel excise was halved on 1 April 2026. That change is not captured in the March quarter figures. If it holds, it should partially offset fuel costs in the June quarter CPI — potentially softening the headline number, though not the underlying trimmed mean.
Written by Amit Narang, Mortgage Broker | Credit Representative 558902 of Outsource Financial Pty Ltd (ACL 384324)
Sources: ABS, "Consumer Price Index, Australia, March Quarter 2026"; RBA, "Cash Rate Target"; Reuters poll of 33 economists, April 27–30 2026; CBA, ANZ, NAB, Westpac — economist commentary, April 2026.
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