The Australian government said that by the end of this year, the growth rate of consumer prices may reach the Reserve Bank of Australia's target range (2-3%). Thus, the government sharply lowered its forecast compared to December, when inflation was expected to slow to 3.75% by mid-2024 and to 2.75% by mid-2025. However, the government's forecast contrasts with the estimates of RBA economists, who predict that inflation will rise to 3.8% by June and remain at this level until the end of the year.
According to official data, consumer price growth accelerated to 1% QoQ in the 1st quarter from 0.6% QoQ in the 4th quarter. Economists had expected the CPI to rise by 0.8%. Year-on-year, consumer inflation fell to 3.6% (the lowest value since the 4th quarter of 2021) from 4.1% in the 4th quarter. Consensus estimates suggested that inflation slowed to 3.4%. The RBA's trimmed mean CPI increased by 4.0% per annum after an increase of 4.2% per annum in the 4th quarter. This was the weakest growth since the 1st quarter of 2022, but the index remained above the central bank's target range of 2-3%. Economists had expected an increase of 3.8% per annum.
Treasurer Jim Chalmers said the budget he will present on Tuesday will prioritize efforts to fight stubbornly high inflation. Regarding the economic outlook, the government predicts that real GDP will grow by 2.0% in fiscal year 2024/25 (-0.25% compared to the last forecast presented in December) and by 2.25% in fiscal year 2025/26 (-0.25% compared to the previous forecast). Commenting on the revised forecasts, the government said that the economy had slowed down due to the impact of global economic uncertainty, high inflation and higher interest rates.