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For the first time in four years, annual trimmed mean inflation has fallen within the central bank’s coveted target.
The latest consumer price index (CPI) figures released by the Australian Bureau of Statistics (ABS) have revealed the CPI rose 0.9 per cent in the March 2025 quarter and 2.4 per cent annually.
While this was unchanged from the reading from the December quarter 2024, trimmed mean annual inflation fell to 2.9 per cent from 3.3 per cent during the previous quarter, marking the first time that trimmed mean annual inflation has fallen with the Reserve Bank of Australia’s (RBA) 2–3 per cent target band since December 2021.
The March quarter rise of 0.9 per cent followed two consecutive quarters of 0.2 per cent rises.
According to the ABS, the main contributors behind the 0.9 per cent rise were housing (1.7 per cent), education (5.2 per cent), and food and non-alcoholic beverages (1.2 per cent).
For housing, this was largely driven by electricity, which rose by 16.3 per cent during the quarter due to electricity price increases in Brisbane, where most households have used up the $1,000 Queensland state government electricity rebate. This has resulted in more households paying for electricity costs out of pocket.
In annual terms, the main contributors were food and non-alcoholic beverages (3.2 per cent), alcohol and tobacco (6.5 per cent), and housing (2 per cent).
Notably, annual services inflation fell to 3.7 per cent during the March quarter, down from 4.3 per cent in the December quarter.
According to Leigh Merrington, ABS acting head of prices statistics, this is the “lowest annual outcome for services inflation since the June 2022 quarter, reflecting easing inflation across a broad range of services, including rents and insurance”.
Meanwhile, the ABS also released the Monthly CPI Indicator for March 2024, which rose 2.4 per cent in the 12 months to March, unchanged from February 2025.
The fall in annual trimmed mean inflation to 2.9 per cent means a rate cut of 25 bps in the RBA’s upcoming May meeting is viewed as a “near certainty”, according to ANZ senior economist Adelaide Timbrell, given the “downside risks to global and domestic growth stemming from global trade policy uncertainty and the inflation outcomes over the past two quarters”.
Callam Pickering, APAC senior economist at Indeed, echoed this sentiment, saying that inflation is “low enough for the RBA to cut rates in May” even if the March quarter CPI print contained “a nasty surprise”.
“But there were no nasty surprises and key metrics, such as trimmed mean and service sector inflation, both improved,” Pickering said.
“Geopolitical and economic uncertainty has created an environment where the RBA will need to cut rates steadily over the next few months.
“The global economic outlook is suddenly much weaker, the US administration is unpredictable and unreliable, and while the direct impact of tariffs on Australia may be low, the indirect impact from weaker growth among our major trading partners may be quite large.”
Although a rate cut may appear to be a sure thing, Krishna Bhimavarapu, APAC economist at State Street Global Advisors, said this was “an old hat for Australia” and what should be observed is “whether the RBA changes its hawkish stance or not”.
“While we are not confident that it may happen, we still expect the cash rate to reach 3.10 per cent by December as global growth comes under pressure from a prolonged trade conflict between the US and Australia’s biggest trade partner, China,” Bhimavarapu said.
This article was originally featured in Real Estate Business’ sister brand Broker Daily. https://www.brokerdaily.au/economy/20316-trimmed-mean-inflation-enters-rba-s-target-band
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