Australia's consumer price inflation slowed to 4.2% in April from 4.6% in March, according to data released Wednesday by the Australian Bureau of Statistics.
The moderation was driven mainly by easing transport costs as fuel prices retreated following a sharp spike in the previous month.
Meanwhile, trimmed mean inflation, a closely watched measure of underlying price pressures, edged up to 3.4% in April from 3.3% in March.
Housing remained the largest contributor to annual inflation, with prices rising 6.3% from a year earlier, driven by higher electricity, rent, and new dwelling construction costs.
Transport prices rose 6.6% year over year in April, slowing from 8.9% in March, while automotive fuel prices fell 7% month over month after surging 32.8% previously.
"Automotive fuel prices fell 7% from March to April, after rising by 32.8% in the previous month. The fall this month includes the halving of the fuel excise on April 1," ABS head of prices statistics Sue-Ellen Luke said.
"Automotive fuel prices are still 23.5% higher compared to February and before the impact of the Middle East conflict," Luke added.
She said higher oil prices also continued to flow through to freight- and logistics-related categories, including parcel delivery services and building materials.
The inflation data comes as Australia's economy shows signs of slowing under the weight of higher borrowing costs and fuel price shocks linked to the Middle East conflict.
Stephen Smith, partner at Deloitte Access Economics, said, as per The Wall Street Journal: "The data suggests the effects of the conflict-driven global energy shock are starting to flow through the Australian economy, adding to price pressures and increasing the risk of another rate hike later this year."
Australia's unemployment rate climbed to a 4-1/2-year high in April, while businesses have also reported mounting pressure from weaker demand and rising operating costs.
Economists expect the latest inflation print to prompt the Reserve Bank of Australia to maintain a hawkish stance at its next policy meeting.
"Today's downside surprise in the headline CPI is welcome and likely cements the case for RBA on hold in June," Krishna Bhimavarapu, APAC Economist at State Street Investment Management, was quoted by Bloomberg as saying.
"However, the uptick in trimmed mean CPI raises concerns of secondary inflationary effects that may be beginning to emerge."
Prior to the release of the inflation data, Robert Thompson, Sydney-based head of economics and strategy at RBC Capital Markets, said, as per Bloomberg: "For the RBA, balancing inflation and growth remains challenging when both look to be on the wrong track."
