Australian inflation above 2% but experts say interest rate rise unlikely

The annual rate of inflation has crept above 2% for the first time in two years but economists say the Reserve Bank won’t be looking to raise interest rates anytime soon with questions remaining over the strength of the labour market.

New figures showed the consumer price index rising 0.5% in the March quarter, a slightly smaller increase than most economists had been expecting.

The most significant price rises in the quarter were for petrol (up 5.7%) and electricity (up 2.5%) but this was partly offset by a 6.7% drop in fruit prices.

It lifted the annual CPI rate to 2.1% and just inside the Reserve Bank’s 2% to 3% target band.

Underlying measures of inflation, which smooth out volatile price swings and are key to interest rate decisions, averaged just over 0.4% growth in the quarter for an annual rate of 1.8%.

The central bank will hold its next monthly board meeting on Tuesday but is expected to leave the cash rate at a record low 1.5%.

In the minutes of the April board meeting, it emphasised the labour and housing markets “warranted careful monitoring over coming months”.

Hopes that March’s strong rise in employment was a turning point for the economy may be premature as new figures show demand for new workers wilting.

Job advertisements on the internet declined 0.6% in March after a revised 0.3% fall in February in trend terms, employment department data released on Wednesday shows.

This left annual growth at just 0.9%. Six of the eight occupational groups monitored by the department fell in the month while declining in three states and the ACT.