Australia's inflation jumps to 4.6% as fuel prices surge 33% amid Iran war shock

Australia's annual inflation rose to 4.6% in March, driven by a 33% month‑over‑month jump in fuel costs linked to the Iran‑Israel conflict.

The annual inflation rate climbed to 4.6% in March, up from 3.7% the previous month, according to the Australian Bureau of Statistics. This marks the fastest pace of consumer price growth in two and a half years. The jump follows a sharp rise in global oil prices after the Iran‑Israel conflict disrupted shipping through the Strait of Hormuz.

Treasurer Jim Chalmers said the fuel‑price shock is likely to push inflation higher than the current 4.6% rate in the coming months. He noted that low unemployment and solid wage growth give the economy a buffer against the shock. Still, he warned that the cost‑of‑living pressure will remain a key focus for the government.

The surge in fuel costs contributed heavily to the headline figure, with petrol and diesel prices jumping 33% month‑over‑month. Excluding volatile items such as fuel and electricity, underlying inflation held steady at 3.3%, suggesting that broader price pressures have not yet accelerated.

Australia's annual inflation rate rose to 4.6% in March, up from 3.7% in February.

Fuel costs increased 33% month‑over‑month, based on ABS data.

Treasurer Jim Chalmers warned that inflation is likely to peak higher than the present 4.6% level.

The international oil price briefly traded above $110 a barrel after hopes of a cease‑fire faded. This pushed the petrol excise cut of 26 cents per liter to be outweighed by the raw price increase.

Higher fuel prices flow through to transport and production costs, which can lift the price of goods ranging from groceries to manufactured items. Analysts expect the Reserve Bank to consider another interest‑rate hike at its next meeting to keep inflation in check.

The government has already halved the fuel excise for three months and introduced a GST rebate on petrol and diesel to soften the blow for motorists. However, economists caution that broad‑based cost‑of‑living support could complicate the central bank’s efforts to bring inflation back to target.

Underlying inflation, which strips out fuel and electricity, remained at 3.3%, indicating that price pressures outside the energy sector have not yet surged. This split gives policymakers a mixed signal as they weigh tightening versus stimulus.

Watch for the Reserve Bank’s interest‑rate decision next Tuesday and the details of the May budget for further cost‑of‑living measures.