Inflation hit 4 per cent in the 12 months to May in a sign the Reserve Bank will need to keep an eye on rising prices.
That’s up from the previous monthly release which showed inflation of 3.6 per cent in the year to April — when petrol, insurance and rents had been among the hardest hit.
The latest data from the Australian Bureau of Statistics shows fuel is up 9.3 per cent over the year.
Rent lifted 7.4 per cent — a slightly lower pace than the prior month — and electricity was 6.5 per cent higher.
ABS head of price statistics Michelle Marquardt said the index “is often impacted by items with volatile price changes like automotive fuel, fruit and vegetables, and holiday travel”.
“It can be helpful to exclude these items from the headline CPI to provide a view of underlying inflation, which was 4.0 per cent in May, down from 4.1 per cent in April,” she said.
On Wednesday morning, assistant governor Chris Kent said the RBA must remain vigilant about fighting inflation, which he said hits lower income households especially hard.
The monthly ABS numbers are a prelude to quarterly inflation data at the end of July, which will be key when the Reserve Bank of Australia next meets in August.
Markets were on Tuesday projecting a 10 per cent chance of a cash rate hike from the RBA board at that meeting.
That data implies a cash rate of 4.08 per cent in June 2025, suggesting the majority of interbank traders only expect one cut in the next year.