‘Too high’: Inflation data shows it’s ‘well above target’

Added: 2026-04-29

[00:00:00]More now on that inflation data out today. Joining us live is HSBC chief economist Paul Bloxham. Paul, good to see you as always. Thanks so much for your time. What is your expectation now around the RBA's next interest rate call?

[00:00:12]Well, we've had this view for a while, but we think they'll be lifting interest rates next week.

[00:00:17]We think that the inflation print just provides confirmation that inflation is too high. We got a trim mean reading, which is the the main measure that the RBA focuses on that ran at 3 and 1/2% over the year, and the RBA targets 2 and 1/2. So, we're still well above target.

[00:00:33]We also got the spike in the headline rate of inflation in March reflecting the higher fuel costs related to the Middle East conflict and and and the energy shock. But the primary thing to focus on is that core measure, and it is too high, and we think that the RBA is likely to still have to lift interest rates further. So, we think a 25 basis point rise next week to 4.35 on the cash rate.

[00:00:53]You mentioned fuel prices. That clearly hasn't helped. Even if the war does come to a resolution soon, how long before you'd expect that inflation to to moderate?

[00:01:02]Well, that's I mean, the big question that you raise, of course, is is when does the Strait of Hormuz reopen? That's the primary one at this point in time, and it hasn't, of course, and the longer that goes on, the more likely it is that oil prices stay high, and actually could even go higher if if if it if it were to persist. In terms of that peak in fuel prices, it really depends on that. It's going to be very much about when the Strait of Hormuz is is is reopened. And I think, you know, for now, it's it's not, so we're working on the assumption that oil prices stay elevated. I think for for Australia, I mean, the way we think about this is although that fuel price story right raises headline inflation, it also is a a cost for households, of course. They face higher fuel bills, and so with that, they have less money to spend on other things, and that actually slows down growth in the economy and likely leads to lower core inflation, medium-term inflation. So, so that medium-term inflation, the core measure, the trim mean, that's what the RBA focuses on. But forgetting putting that aside for the moment, inflation is already too high the even before we think about the Middle East conflict and its effect on on inflation, it's already too high going into this, and that's what today's print showed. So, that tells us the RBA I think is likely to lift interest rates a bit further yet.

[00:02:15]Paul, it's tricky timing, isn't it, for the government with the budget coming up in a couple of weeks' time? What would you be looking out for as an economist on budget day? What decisions are you keenly anticipating?

[00:02:26]Look, the real thing they need to focus on is not pump-prime the economy too much. We need the We need fiscal policy not to deliver some big stimulus to the economy because if it does that, and it boosts demand at a time when inflation's already too high, it will add more to that inflation, and that will put even more challenges for the RBA and and potentially mean they have to lift interest rates even further. And so, the key is that it's very targeted. Any support measures that are delivered within the budget need to be really quite targeted to households that really need it. And I think the primary thing for the budget ought to be a really big focus on the supply side, on productivity-enhancing reform. We need to be able to grow this economy faster than we have been over the last little while. The speed limit for the Australian economy is too low.

[00:03:11]It's much lower than it's been in the past, and now is the time to focus on trying to do some of those reforms that might lift productivity, tax reform, competition policy reform, industrial relations reform, the regulatory environment. These are all things on the list. And so, the thing I'll be looking out for is how much of that actually gets delivered as a part of the budget on the 12th of May.

[00:03:33]Paul Bloxham, really appreciate you sharing your expertise with us. Thanks so much.

[00:03:36]Thank you.