Summary:

• CBA forecasts annual headline CPI easing to 4.3% in April, with lower fuel prices the primary drag, driven partly by a temporary fuel excise reduction
• Westpac takes a more hawkish view, forecasting headline CPI rising to 4.8% annually, with holiday travel and clothing and footwear costs pushing prices higher
• Both banks see trimmed mean inflation holding firm, with CBA forecasting 3.4% annually and Westpac 3.5%; market services inflation estimated at 3.8% by CBA
• CBA expects quarterly trimmed mean inflation to accelerate to 1.0% in Q2 2026, though flags significant uncertainty around the degree to which firms pass higher costs to consumers
• April’s data is described as a key test of whether inflation pressures from the Iran conflict are widening beyond fuel into the broader economy

Australia’s April consumer price index release is shaping up as a pivotal data point for the Reserve Bank, with two of the country’s largest lenders split on the headline outcome and both watching closely for signs that inflationary pressures from the Iran conflict are spreading beyond energy costs.

Commonwealth Bank of Australia expects annual headline inflation to ease to 4.3% in April, pulled lower by declining fuel prices following the government’s temporary halving of the fuel excise. The relief on transport costs, however, is expected to mask ongoing firmness in underlying price pressures. CBA forecasts the monthly trimmed mean measure rising to 3.4% on an annual basis, with market services inflation running at approximately 3.8%, a level that signals domestic demand-side price dynamics remain far from settled.

Westpac takes a more hawkish view on the headline, forecasting annual CPI accelerating to 4.8%, above the market consensus of 4.4%. The bank attributes the increase to holiday travel costs and clothing and footwear prices, with the fuel excise reduction and free public transport in some states providing only a partial offset. Westpac’s trimmed mean forecast of 3.5% annually sits fractionally above CBA’s estimate, and the two banks are broadly aligned on the message that underlying inflation is not yet responding meaningfully to the easing of headline energy costs.

For the RBA, the April release carries unusual weight. March data showed limited spillover from the Middle East conflict beyond direct fuel price effects, but both banks flag that early indications of broader cost pass-through are beginning to emerge. The degree to which Australian businesses translate higher input costs into consumer prices in the coming months is identified as the central uncertainty in the outlook.

CBA’s expectation of quarterly trimmed mean inflation reaching 1.0% in the second quarter of 2026 underscores the persistence of the problem. With underlying inflation still running well above the RBA’s target band, and the central bank having raised rates at each of its three meetings so far this year, the April print will do much to determine whether further tightening remains on the table or whether the hiking cycle is nearing its end.

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The divergence between CBA’s 4.3% and Westpac’s 4.8% headline forecasts reflects genuine uncertainty about how quickly Iran conflict-related cost pressures are broadening beyond energy. The fuel excise reduction provides a one-off drag on headline that could flatter the top-line read and complicate the RBA’s signal-extraction problem. Trimmed mean estimates are tightly clustered around 3.4-3.5% annually, suggesting underlying price momentum remains the more meaningful policy input. A print above consensus on either measure would reinforce the case for the RBA to extend its hiking cycle; a miss could prompt markets to question whether the three consecutive increases already delivered have done enough. Market services inflation running near 3.8% annually indicates domestic demand-side pressures have not yet dissipated.