Updated 2 May 2025
The Consumer Price Index (CPI) remained steady at 2.4% p.a in the March 2025 quarter; headline inflation has been within the RBA’s target range for the third consecutive quarter since the pandemic.
Quarterly consumer price inflation rose by 0.9% in the March quarter 2025, resulting in an annualised inflation rate of 2.4%. This marks the lowest annual inflation rate observed since the first quarter of 2021.
The RBA forecast CPI to rise up to 3.7% by December quarter 2025 before falling throughout 2026, Treasury forecasts for the same period are lower.
The Trimmed Mean Inflation (TMI), which offers a better reading of underlying inflation by excluding volatile items, was 2.9% in March. This is the first quarter in which both headline and underlying inflation was within the Reserve Bank's target band for the first time since 2021.
The Producer Price Index (PPI) – a measure of industrial prices – remained steady at to 3.7% in the March quarter.
Key contributors to rising prices in the March quarter were education (+5.2%), housing (+1.7%) and food and non-alcoholic beverages (+1.2%). The increase in housing for this quarter was primarily due to a 16.3% rise in electricity costs. Higher electricity prices in Brisbane, after the $1,000 rebate was used up, drove the rise.
Annual goods inflation climbed to 1.3% in the March quarter, primarily due to a rebound in electricity prices following significant drops in the previous two quarters.
Annual services inflation fell to 3.7% in March from 4.3% in December, the lowest since June 2022, reflecting broad easing in services like rents and insurance.
The Consumer Price Index (CPI) measures changes in the price of a ‘basket’ of goods and services which account for a high proportion of expenditure by metropolitan households. Comprehensive CPI data is published by the Australian Bureau of Statistics quarterly, while a reduced price survey is conducted every month to supplement the quarterly data.
The Quarterly CPI measure is considered the more reliable indicator of inflation, as it measures all consumer prices. The monthly CPI measure is less accurate, but provides more timely insights on price changes that complement the quarterly release.
The Producer Price Index (PPI) measures changes in the price of industrial goods as they are produced. Some products – for example food – are measured in both the CPI and PPI indicators. PPI measures the price obtained by the producer, while CPI measures the price paid by the final consumer.
For more information from the ABS (including advice on using the CPI in contracts) see: https://www.abs.gov.au/statistics/detailed-methodology-information/information-papers/use-price-indexes-contracts
Ai Group Research & Economics Team
Website: Research and Economics Resource Centre
Email: economics@aigroup.com.au
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