Omari Gates
The Consumer Price Index (CPI) is a measure of price changes for goods and services that households typically buy. In Australia, the Australian Bureau of Statistics (ABS) calculates the CPI each quarter. The CPI measures the prices paid by households for goods and services during a particular measurement period, such as a month or quarter. The latest data shows that the CPI rose by 0.9% in the March 2025 quarter. This article will explore the current CPI rate in Australia and provide an overview of the CPI's role and calculation methodology.
| Characteristics | Values |
|---|---|
| Time Period | March Quarter 2025 |
| CPI Rise | 0.9% |
| CPI Rise Over 12 Months | 2.4% |
| Significant Price Rises | Housing (+1.7%), Education (+5.2%), Food and non-alcoholic beverages (+1.2%) |
| Offsetting Price Drops | Recreation and culture (-1.6%), Furnishings, household equipment and services (-0.9%) |
| Data Source | Australian Bureau of Statistics (ABS) |
| Data Frequency | Monthly, quarterly, annually |
| Data Collection Frequency | Depends on how often prices change (e.g., monthly for food and petrol, quarterly for restaurant meals and hairdressers, annually for some education fees) |
| Data Groups | Food, alcohol and tobacco, clothing and footwear, housing, household contents and services, health, transportation, communication, recreation, education, financial and insurance services |
| Data Basket | Goods and services that households typically buy |
| Data Calculation | Quarterly, with a monthly indicator for updated prices for around two-thirds of the items in the basket |
| Inflation Target | 2% to 3% annually |
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What You'll Learn
Housing, education, and food prices
The Consumer Price Index (CPI) in Australia rose 0.9% in the March quarter of 2025. In the 12 months leading up to this quarter, the CPI rose 2.4%. The most significant price increases during this period were in housing, education, and food and non-alcoholic beverages.
Housing
The CPI measures the prices paid by households for goods and services, including rents. The Australian Bureau of Statistics (ABS) introduced a new data source in July 2022 to measure the Rents series in the monthly and quarterly CPI. The new dataset includes approximately 480,000 rental properties, a significant increase from the previous dataset of 4,000 properties. This change provides a more accurate reflection of the rental market across all capital cities.
Education
The education sector in Australia has seen a notable increase in prices, with a 5.2% rise in the March quarter of 2025. This indicates that households are paying higher prices for educational goods and services during this period.
Food Prices
Food and non-alcoholic beverages also experienced a price increase of 1.2% in the same quarter. This suggests that households are facing higher costs for their grocery and dining expenses.
The CPI weights are regularly updated to reflect contemporary household spending patterns, ensuring that the CPI basket remains relevant to the changing economic landscape.
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Inflation and monetary policy
The Consumer Price Index (CPI) in Australia for the March quarter of 2025 was reported to have risen by 0.9% for the quarter and 2.4% for the year. The Australian CPI measures the prices paid by households for goods and services during a particular measurement period.
Monetary policy is a set of actions by a nation's central bank, such as the US Federal Reserve or the European Central Bank, to control the overall money supply and achieve economic growth. The basic approach to monetary policy is to change the size of the money supply, which can be done through open-market operations, where short-term government debt is exchanged with the private sector. Central banks can also use tools like interest rates to adjust the supply of money and keep the economy stable.
The linkages between monetary policy and inflation are not direct or immediate, but monetary policy is an important factor in influencing inflation. Central banks today primarily use inflation targeting to keep economic growth steady and prices stable. If prices rise faster than their target, central banks can tighten monetary policy by increasing interest rates or restricting the money supply. Conversely, if inflation falls and economic output declines, the central bank can lower interest rates and make borrowing cheaper.
In a recession, consumers spend less, business production declines, and firms lay off workers. This leads to a decline in overall demand, which the government can respond to with a countercyclical monetary policy. Such a policy would lead to the desired expansion of output and employment, but it would also result in an increase in prices. As an economy gets closer to producing at full capacity, increasing demand will put pressure on input costs, including wages, which can further push inflation upward. Therefore, monetary policymakers must balance price and output objectives to avoid unintended inflation.
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Supply and demand
The Consumer Price Index (CPI) in Australia rose by 0.9% in the March quarter of 2025. This indicates an increase in the prices of goods and services that households consume. The CPI measures the prices paid by households for goods and services over a specific period, such as a month or quarter. The recent CPI increase in Australia was driven by significant price rises in certain sectors.
The supply and demand dynamics in various sectors influenced the CPI movement in Australia. Here's an analysis of the sectors that experienced notable changes:
Housing: The housing sector witnessed the most significant price increase of 1.7% in the March quarter. This rise can be attributed to factors such as increased demand for rental properties, limited housing supply, or rising construction costs. The demand for rental properties, in particular, has led to higher rents, contributing to the overall CPI rise.
Education: Education costs surged by 5.2% during the same quarter. This increase was driven by fee hikes in secondary, preschool, and primary education due to higher operating costs. Additionally, tertiary education fees rose by 3.6% due to annual CPI indexation. The demand for education remains relatively inelastic, as it is essential for individuals' future prospects. Therefore, educational institutions can pass on their increased costs to students and their families.
Food and non-alcoholic beverages: This sector experienced a notable price increase of 1.2%. Factors influencing this rise could include increased demand for certain food items, disruptions in the supply chain, or adverse weather conditions impacting crop yields and, consequently, prices.
Recreation and culture: In contrast to the overall CPI rise, the recreation and culture sector witnessed a price decrease of 1.6%. This decline could be attributed to seasonal factors, as the peak holiday season ended, leading to lower demand for travel and accommodation.
Furnishings, household equipment, and services: This sector also offset the overall CPI rise, with a price decrease of 0.9%. This drop could be due to various factors, such as increased competition in the market, promotional activities, or a shift in consumer preferences.
The CPI weights used in the CPI basket are regularly updated to reflect contemporary household spending patterns. These weights ensure that the CPI accurately represents the demand and consumption patterns of Australian households.
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International travel and exchange rates
The Consumer Price Index (CPI) in Australia rose by 0.9% in the March quarter of 2025. Over the twelve months to the March 2025 quarter, the CPI rose by 2.4%. The most significant price increases were in housing (+1.7%), education (+5.2%), and food and non-alcoholic beverages (+1.2%).
When it comes to international travel and exchange rates, it's important to understand that exchange rates fluctuate constantly due to supply and demand. The demand for a particular currency can shift in response to various factors, such as political events, economic conditions, trade flows, and changes in investor sentiment. Central banks, including the Reserve Bank of Australia (RBA), play a pivotal role in influencing exchange rates through their monetary policies and interest rate decisions. The actions of the RBA can impact the attractiveness of the Australian dollar to investors, consequently affecting its global market value.
As a traveller, it's worth noting that different financial institutions and foreign currency providers in Australia may offer varying exchange rates. It is advisable to shop around and compare rates before making any transactions. Services like the Travelex Travel Rate Tracker allow you to set rate alerts for your desired currency, helping you stay informed about exchange rate movements. Additionally, consider the various products available, such as prepaid travel cards, which can offer benefits like favourable exchange rates for specific currencies or transactions above a certain amount.
When planning international travel, it's essential to stay updated with the latest exchange rate information. Websites like ANZ and Travelex provide current exchange rate values, allowing travellers to make informed financial decisions. It's also important to be aware of any fees or charges associated with foreign exchange transactions, as these can vary between providers. By staying vigilant and informed, travellers can maximise the value of their currency exchanges and make the most of their international travels.
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Household spending patterns
Rent and dwelling costs are typically the most significant expense for Australian households. In 2024, the average household spent $536 per week on rent and dwelling services, with residents of the Northern Territory spending the most at $885 per week. Housing costs have been a significant source of stress for many Australians, with 42% ranking rent or mortgage among their top three most stressful bills.
Other notable expenditures include recreation and culture, food, and spending on hotels, cafes, and restaurants. The average household spends $257 per week on recreation and culture, $253 on food, and $198 on dining out. There are also variations in spending patterns across different states and territories. For example, households in the Northern Territory have the highest average weekly spend at $3,169, while Tasmanian households spend the least at $2,095 per week.
In terms of discretionary and non-discretionary spending, patterns vary month-to-month. In February 2025, non-discretionary spending fell 0.1% from the previous month due to decreased spending on motoring goods, motor vehicle repair and maintenance, and total health services. On the other hand, household spending increased for five out of nine spending categories, indicating an increase in discretionary spending during that period.
The Consumer Price Index (CPI) is a critical indicator of household spending patterns in Australia. The CPI measures the prices paid by households for goods and services during a specific period, such as a month or quarter. In the March quarter of 2025, the CPI rose by 0.9%, with the most significant price increases in housing (+1.7%), education (+5.2%), and food and non-alcoholic beverages (+1.2%). These CPI updates reflect the changing costs of goods and services that directly impact household budgets and spending decisions.
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Frequently asked questions
The CPI is a measure of household inflation, capturing price changes for the goods and services that households typically buy.
The Australian Bureau of Statistics (ABS) produces the CPI each quarter, but also publishes a monthly indicator that includes updated prices for around two-thirds of the items included in the CPI basket.
As of March 2025, the quarterly CPI rose 2.4% over the previous 12 months. The monthly CPI indicator also rose 2.4% in the 12 months to March 2025.
The largest contributors to the annual movement were food and non-alcoholic beverages (+3.4%), alcohol and tobacco (+6.7%), and housing (+1.8%).
The CPI is calculated independently by the ABS, which collects prices for goods and services (the CPI basket) from a variety of retailers across the eight capital cities. The frequency of price collection depends on how often prices change for each good or service.
