API Magazine | Huge Spike in Inflation Could Spell Big Trouble for Borrowers

API Magazine journalist Craig Francis reports on the sharp rise in Australia's Consumer Price Index to 4.6 per cent in the 12 months to March 2026 — the highest annual inflation reading since September 2023 — and what it means for borrowers, interest rates, and the property sector.

The spike was driven primarily by automotive fuel prices, which jumped 32.8 per cent in March alone amid ongoing disruption to energy markets following the Middle East conflict. Housing costs also remained a significant contributor, rising 6.5 per cent over the year. The RBA's preferred underlying measure, trimmed mean inflation, held steady at 3.3 per cent annually — offering some relief, though markets are still pricing in further tightening before year's end.

Oliver Hume Property Group Chief Economist Matt Bell said the result confirms what is already playing out across the construction and development sectors. Transport costs for materials and labour are rising and being built into upcoming price increases that will ultimately be borne by consumers, with the key question being how long elevated building cost inflation will persist. Mr Bell forecasts headline inflation to reach between 5 and 6 per cent by June, with underlying inflation pushing toward 4.0 per cent by year's end.

On the property outlook, Mr Bell noted that while strong demand fundamentals remain in place, plunging consumer sentiment and the potential return of excessive construction cost growth represent serious risks for the remainder of 2026.

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