National

Inflation edged down before start of Iran war

Mar 25, 2026

Price tags in Coles — Prices have been rising fast - and that's expected to increase due to the Iran war. -AAP Image

Australia's headline inflation rate fell in the final data before the Iran war up-ended the global economy.

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Data published by the Australian Bureau of Statistics on Wednesday showed consumer prices rose 3.7 per cent in the 12 months to February, down from 3.8 per cent in January.

Economists from National Australia Bank had predicted the headline rate to hold at 3.8 per cent.

Trimmed mean inflation - which excludes volatile items to provide a sense of underlying inflation - held steady at 3.3 per cent.

The largest contributor to price growth was housing, which rose by 7.2 per cent, said Sue-Ellen Luke, ABS head of prices statistics.

Transport costs actually fell 0.2 per cent in the year to February, thanks to a 7.2 per cent drop in fuel costs.

But that is set to reverse in March, with some economists predicting fuel could rise by more than 25 per cent.

NAB senior economist Taylor Nugent said while the data had been overtaken by recent events, it remained important in shaping the Reserve Bank's assessment of how inflationary domestic conditions were before the Iran shock.

The central bank raised interest rates for a second straight month earlier in March.

Governor Michele Bullock said the Iran war will add to Australia's inflation problem, but domestic conditions were already too tight before its outbreak.

Ahead of the inflation release, money markets were pricing in another three rate hikes by Christmas, which would leave the cash rate at its highest level in 15 years.