Inflationary pressures in Australia continue to cool, bolstering expectations for added interest rate relief.
The Australian Bureau of Statistics (ABS), released its quarterly consumer price index (CPI) Wednesday, revealing inflationary pressures have remained largely static in the March 2025 quarter, compared with the previous reading.
While inflation rose 0.9% for the quarter, compared with 0.2% at the December reading, in the 12 months leading up to March, the CPI rose 2.4%, the same as the December 2024 quarter.
Meanwhile, the monthly trimmed mean inflation — which measures underlying inflation by stripping out goods with volatile prices changes and what many consider a better indicator of inflationary pressures — fell to 2.9%, down from an adjusted rate of 3.3% in the December quarter, the lowest rate since December 2021. Both figures indicate a gradual easing of underlying inflationary pressures.
By sector, housing rose 2% for the year. Other noticeable price increases included health, alcohol and tobacco, and education.
The results were largely in line with market expectations. Commonwealth Bank (CBA) analysts anticipated "relatively benign underlying inflation" for the quarter.
But homeowners also have reason to rejoice.
The Reserve Bank of Australia (RBA) has previously said it's targeting an inflation rate between 2% and 3%, before it will continue reducing the official cash rate (OCR). Mortgage holders were dismayed earlier this month when the bank decided to hold the OCR at 4.10%, citing uncertainties around inflation and economic activity.
Meanwhile, a number of additional — often conflicting — signals are influencing Australia's property markets. Uncertainties persist around the nation's unemployment rate, an upcoming election and a lack of affordable housing, all of which could potentially drive up house prices or stall consumer spending and inquiries about credit.
At the same time, continual volatility on the global stage in regards to US President Donald Trump's tariffs has left many at a standstill.
But some say tariff tensions are all but guaranteeing the RBA will slash rates next month.
"A few months ago, the RBA’s main concern was that a still tight labour market would keep domestic inflation pressures sticky," Luci Ellis, chief economist at Westpac Group, wrote in a recent note. "The turmoil abroad has, however, changed the game and flipped the risks. You can lock in a 25 basis point cut in May, even if the Q1 inflation data are a shade disappointing."
Tariff tensions aside, Wednesday's quarterly results will likely inject an even stronger sense of optimism into the market, with homeowners and investors hopeful that the nation's falling inflationary pressures will lead to added rate relief at the central bank's May 19 to 20 meeting.
All four of Australia's Big Four Banks have come out to forecast further rate reductions this year.
In addition, in anticipation of the RBA's decision, several banks have already begun reducing their fixed mortgage rates — 18 banks in total in recent weeks, including National Australia Bank (NAB). Earlier this month, Macquarie Bank cut its two- and three-year fixed interest mortgage rates to 5.19%, the lowest on the market, heating up competition in the fixed mortgage sector.
