Australia's inflation woes persist as CPI reveals high cost pressures

By Newsdesk

March 26 2026
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Australia's inflation rate remains a pressing concern, with the latest Consumer Price Index (CPI) figures for February indicating that inflation continues to be "too high" for the Reserve Bank of Australia (RBA). The CPI annual inflation rate registered at 3.7% for the year to February, a marginal decrease from January’s 3.8% annual figure. This slight improvement, however, does little to alleviate the ongoing inflationary pressures that Australian households are grappling with.

Australia's inflation woes persist as CPI reveals high cost pressures

Bob Cunneen, MLC Senior Economist, highlighted the persistent challenge posed by inflation. "Australia’s Consumer Price Index (CPI) for February shows inflation remains 'too high' for the Reserve Bank," he stated, emphasising the uphill battle faced by policymakers. The Australian Bureau of Statistics (ABS) noted that housing was the largest contributor to annual inflation, with a 7.2% rise, followed by food and non-alcoholic beverages at 3.1%, and recreation and culture at 4.1%. Electricity costs have surged dramatically, rising 37.0% in the 12 months to February, up from 32.2% in January. This increase is largely attributed to households exhausting the extended Commonwealth Energy Bill Relief Fund (EBRF) and various State Government rebates.

Cunneen further warned of impending challenges, noting, "Yet all this February CPI data comes before the impact of the Middle East conflict on oil prices which will be experienced from March." The geopolitical tensions in the Middle East have led to a spike in fuel prices, which is expected to exacerbate the cost-of-living challenge for many Australians. Higher fuel costs are likely to drive up transport expenses, which in turn could lead to increased grocery prices at the supermarket checkout. Additionally, there is a risk that the crisis could lead to higher fertiliser costs, thereby impacting fresh food prices.

The RBA's forecast of 4.2% annual inflation by June, as outlined in their February Statement of Monetary Policy, is now considered outdated. With Brent crude oil prices reaching US$103 and Australian petrol prices exceeding $2.40 per litre, there is a possibility of inflation reaching 5% in the coming months. "Accordingly, another 0.25% interest rate rise by the RBA is the most likely prospect in May given the soaring trajectory of Australia’s inflation rate," Cunneen predicted.

RBA Governor Michelle Bullock addressed the issue of rising petrol prices during a press conference on March 17, 2026, stating, "Higher petrol prices will add to inflation, but they’re not the reason for today’s decision. Inflation was already too high, reflecting the fact that demand is outstripping supply."

In this challenging economic environment, Jenneke Mills, MLC Finance Expert, offers practical advice for consumers navigating ongoing cost-of-living pressures. Mills advises individuals to start with a simple approach by reassessing their budgets. "When things like fuel prices and general cost of living increases, it can be tempting to dip into your savings, but do a fresh budget focused on the next 6-12 months, and separate out essentials from discretionary spending to give you a clearer picture of where you're actually at," she suggested.

Mills also recommends being strategic about fuel and transport costs, highlighting that small changes can lead to significant savings. She advises checking supermarket fuel apps and loyalty discounts, reconsidering the necessity of a second car, and factoring in fuel efficiency when purchasing a new vehicle. Additionally, Mills encourages consumers to re-shop insurance and subscriptions annually to avoid unnoticed price increases and to actively chase concessions and rebates for energy and utilities.

Reviewing energy use is another area where Mills sees potential savings. "Switching providers can help, but usage habits often drive larger savings. Energy costs compound quickly – even modest changes add up," she explained. For renters and apartment dwellers, she suggests cost-effective measures like LED upgrades and draft-proofing.

Mills emphasises the importance of staying calm and avoiding rash decisions driven by 'inflation panic'. She cautions against selling long-term assets too early or cancelling insurance or health cover that may be needed later. For those feeling anxious, Mills advises reaching out to a financial adviser, noting that super funds often have resources available for guidance.

As Australia continues to navigate these inflationary challenges, both policymakers and consumers must adapt to the evolving economic landscape, balancing immediate needs with long-term financial stability.

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