'Risk of recession' as inflation jumps and interest rate hike looms | The Business | ABC NEWS

Official figures highlight the recent spike in prices across the economy. Inflation jumped 1.1 per cent in March and 4.6 per cent for the year - which is the highest it's been since September 2023. A big contributor was fuel, up 32.8 per cent in March alone - the strongest monthly increase since the start of the data series in 2017. On average, petrol rose 33 per cent to 228 cents a litre, premium unleaded was up 30 per cent, while diesel jumped 41 per cent. Australians were also hit with higher electricity prices as energy rebates came to an end. Rents rose and the cost of building new homes went up as builders passed on higher labour and material costs to customers. Treasurer Jim Chalmers says he's aware of the financial pressure facing households. "We do understand that people are under pressure. That's why we cut the fuel excise. That's why we're providing cost of living help. That's why we're providing additional tax cuts." He said. The cost of fuel has been falling since the excise was halved and isn't included in the latest inflation figures. But motoring group, NRMA, insists the inflation threat will not disappear until the Middle East conflict is resolved. Spokesperson Peter Khoury says, "we do need obviously the war to end permanently... And we are obviously hoping that prices will get back to those pre-war levels. But it may take some months." The government warns the inflation pain may get worse before it gets better.

Even the Reserve Bank's preferred measure of inflation -- the underlying rate -- is still above its target band of between 2 and 3 per cent.
It's more bad news for millions of households with the central bank widely expected to hike interest rates next week. Paul Bloxham is among economists forecasting an interest rate hike in May. He thinks there's a risk Australia could tip into a recession but it's not HSBC's central case. He says "we see one quarter of contraction in GDP. And we see that because we think that high inflation, higher costs of living. higher fuel costs are going to see the consumer pull back quite sharply in the second quarter." The Reserve Bank Board is holding its next interest rate meeting on May 4-5.
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