Q1 CPI Surprises Higher — Third Hike on the Table
The March-quarter Consumer Price Index has printed at 3.8% year-on-year, comfortably above consensus forecasts of 3.5% and well clear of the RBA’s 2–3% target band. The result has reopened the debate over whether the central bank will deliver a third consecutive rate hike on 5 May, after back-to-back 25-basis-point increases in February and March took the cash rate to 4.10%.
What’s Driving the Print
Underlying the headline surprise were three stubborn components:
- Housing services (rents + new-dwelling purchases) accelerated to 4.9% annual, the highest reading in 14 months
- Insurance and financial services reaccelerated to 6.1%, reflecting premium renewals that lock in higher pricing
- Petrol and transport added 0.6 percentage points on the quarter as Middle East tensions pushed Brent crude above US$97
Services inflation — the RBA’s most closely watched sub-aggregate — held at 4.0%, barely budging despite three months of higher borrowing costs.
Rate Markets Repricing
In the minutes after the ABS release, the AUD Overnight Index Swap curve shifted to imply a ~72% probability of a hike at the May meeting, up from 38% the previous day. A third hike would push the cash rate to 4.35% — the highest since August 2024.
At that level:
- A $600k mortgage adds a further ~$92/month; cumulative 2026 impact ~$273/month
- A $1M mortgage adds ~$153/month; cumulative 2026 impact ~$455/month
Property Market Read-Through
Agents are reporting noticeably slower auction pacing in the inner ring of Sydney and Melbourne since the CPI print. Vendors are being advised to sharpen pricing ahead of May. First-home buyers — whose borrowing capacity has already contracted by ~$70–$100k since December — are increasingly pre-qualifying at higher LVRs and relying on parental guarantees to stay in the market.
Brisbane and Perth remain the relative strongholds, supported by interstate migration and constrained supply, though price growth has moderated to a monthly pace under 0.5%.
What to Watch
- 1 May — March building approvals (supply indicator)
- 2 May — National retail sales (consumer demand)
- 5 May — RBA Board decision + post-meeting press conference
If the Board hikes and accompanies it with hawkish forward guidance, expect a further leg down in clearance rates through winter. A hold-with-hawkish-language scenario would be mildly supportive for the market by removing immediate uncertainty.
