Australia’s annual inflation rate dropped to 3.7% in February, contrary to economists’ expectations of it remaining at 3.8%. The consumer price index (CPI) increased by 3.7% in the year to February, down from the 3.8% reported in December and January, as per data from the Australian Bureau of Statistics (ABS).
Financial markets had anticipated headline inflation to stay at 3.8% for the third consecutive month. The ABS noted that the annual trimmed mean, a key measure of underlying inflation favored by the Reserve Bank of Australia (RBA), held steady at 3.3% in February, surpassing the central bank’s 2-3% target range.
Following the RBA’s Monetary Policy Board decision on March 17 to raise the official cash rate to 4.1% for the second consecutive month, Wednesday’s data was released. The board highlighted that escalating fuel prices due to the Middle East conflict would contribute to inflation.
Treasurer Jim Chalmers, in response to the ABS figures, expressed concerns about high inflation even before the war outbreak, emphasizing that the conflict would exacerbate the situation. Chalmers had previously warned that prolonged conflict might push inflation above 5.0% in 2026 and mentioned exploring diverse options to tackle inflation in a recent business event speech.
The ABS identified a 7.2% surge in housing prices as the primary driver of inflation in the year to February, followed by a 3.1% increase in food and non-alcoholic beverage prices.
