With 8.5 (7.5) per cent inflation in the U.S.A. (Euro area), the release of the Consumer Price Index for Australia on April 27th was long-awaited. And I believe it is higher than expected. The year-ended C.P.I. inflation (trimmed mean) is now at 5.1 (3.7) per cent. These are clearly above the 2-3 per cent target and the highest we have experienced in a decade.

Two items that have contributed greatly to this are fuel (due to the war in Ukraine) and construction costs (due to supply chain disruptions). None of the underlying conditions are resolved and I believe we should expect further price increases through those channels. Australian households have also been hit hard by the increasing food prices. Inflation is not only affecting families negatively, but also businesses. According to today’s (28th of April) release on Business Conditions and sentiments, 57 per cent of all businesses experienced increases in their operating costs in 2022 and 48 per cent have passed such increases in costs (either partially or fully) through increasing prices to the customers.

Given this economic situation, I believe it is now appropriate that in the May meeting, the policy target cash rate finally lifts off.