Australians’ inflation expectations eased in mid-May, according to the ANZ-Roy Morgan Inflation Expectations survey, reflecting falling petrol prices and receding fears over global tariffs.
The drop comes as the Reserve Bank slashed the cash rate by 25 basis points to 3.85% in May — its second cut this year — amid soft inflation data and global uncertainty.
Weekly inflation expectations fell to 4.5% for the week of May 12-18, 2025 — down 0.3 percentage points from the monthly April average of 4.8%. This marks two consecutive weekly declines in May and reverses the mild increases seen in March and April.
“ANZ-Roy Morgan Inflation Expectations in Australia have dropped in May and are now at 4.5%, down 0.3% points from the month of April (4.8%),” said Roy Morgan CEO Michele Levine (pictured).
“Before falling in recent weeks, inflation expectations had increased marginally by 0.1% points in both March and April.”
Over the past year, expectations have ranged between 4.2% and 5.2%, averaging 4.8%.
Inflation expectations briefly climbed in April amid heightened geopolitical tensions, particularly after US President Donald Trump announced sweeping tariffs on major trading partners.
“The drop in inflation expectations in recent weeks comes after worries concerning inflation spiked in April as US President Donald Trump announced on so-called ‘Liberation Day’... significant tariffs on all major US trading partners,” Levine said.
However, the rollback of several proposed tariffs — including a 90-day suspension on levies against China — has helped ease market concerns.
“Trump’s desire to get ‘good deals’ with trading partners is set to see tariffs lower than feared going forward,” Levine said.
Petrol prices were a key factor in May’s inflation relief. Average retail prices dropped to $1.70 per litre in mid-May — the lowest since September 2022. Prices have remained below $1.80 for eight consecutive weeks, the longest such stretch since late 2022.
“Average retail petrol prices hit $1.70 per litre this week – the lowest for well over two-and-a-half years since September 2022,” Levine said.
“The volatility in energy prices, and inflation expectations, shows how sensitive Australians are to changes in the prices of essential everyday goods – like petrol.”
Despite price relief in May, long-term data shows retail petrol prices have averaged $1.87 per litre since February 2024 and $1.80 since August 2024.
The ABS monthly CPI estimate was 2.4% for the year to March — squarely within the Reserve Bank’s 2–3% target range for the eighth consecutive month.
“The sharp reduction in inflationary pressures in the broader economy over the last year... led to the Reserve Bank cutting official interest rates by 0.25% to 4.1% in mid-February 2025 and is set to lead to an additional interest rate cut later today.”
The next monthly CPI reading is due May 28, followed by another on June 25 ahead of the RBA’s July meeting, which markets now see as a live opportunity for a third rate cut if inflation data remains soft.
State data for April showed inflation expectations topped 5% in Tasmania and Queensland, with Tasmania up 1.1 points to 5.1%. Victoria recorded the lowest figure at 4.7%, while other states hovered around the national average of 4.8%.
Expectations in regional areas remained unchanged at 5.1% in April, while capital city expectations rose slightly to 4.7%.
