Consumer Price Index data released today by the Australian Bureau of Statistics shows the nation has recorded the largest quarterly and annual increase in inflation since the introduction of the Goods and Services Tax (GST) in 2000.
Annual inflation is up 5.1 per cent – well above the expectations.
It is a historic surge given the last time inflation prices rose around 6 per cent was in June 2021 but it was largely from the effect of the recently introduced 10 per cent Goods and Services Tax - which obviously increased the prices paid by consumers.
The shock figure beats market expectations, which was expecting annual CPI rise just around 5 per cent and a rate hike to be delayed to June.
Even underlying inflation which strips out the most extreme price moves and is more closely watched by the Reserve Bank of Australia (RBA) surged 3.7 per cent, smashing the 2-3 percent target band.
However, the new reality will leaves no option to the Reserve Bank of Australia (RBA) but to move next week on May 3 as leaving the cash rate at 0.1 per cent is visibly inappropriate and would be seen as delayed by political pressure due to the federal election.
The updated market expectation now is more aggressive moves - two subsequent rate hikes in May and June to move the cash rate to at least 0.75 per cent and to 1 per cent in September.
