Australia's inflation is expected to continue declining.

The Australian dollar weakened over the past week as new U.S. tariffs are set to take effect next week, escalating global trade tensions. Investors are also turning their attention to the Reserve Bank of Australia's (RBA) policy decision next week, where the central bank is expected to keep interest rates at 4.1%. Current forecasts suggest no rate cuts until July. Meanwhile, Prime Minister Anthony Albanese has announced a general election on May 3, launching a campaign focused on tax cuts and easing the cost of living.

Australia’s Composite PMI rose to 51.3 in March from 50.6 in February, marking the strongest private sector growth in seven months. This was driven by an increase in the manufacturing sector to 52.6, the fastest expansion in two years. Output growth was supported by higher new business activity, despite a decline in export orders. At the same time, employment levels increased again, leading to the steepest drop in backlogged work in three years. Input costs saw intensified pressures, but companies opted to absorb some of these costs due to declining business confidence over the next 12 months.

Australia’s tax rate will be reduced from 16% to 15% by July 1, 2026, providing over AUD 3 billion in tax relief for the 2026 and 2027 fiscal years. The tax rate will further decrease to 14% by July 1, 2027, resulting in a total income tax relief of AUD 6.7 billion. These reductions apply to all taxpayers, with the budget supporting energy costs, first-time homebuyers, and healthcare investments. Additionally, defense spending will increase by AUD 1 billion to counter China’s growing assertiveness and pressure from the U.S. Due to the increased military budget, the deficit for 2025 is projected to be AUD 27.6 billion after two years of surplus, while the 2026 fiscal deficit is expected to reach AUD 42.1 billion, or 1.5% of GDP.

Australia’s Consumer Price Index (CPI) rose 2.4% year-over-year in February, down from a four-month high of 2.5% in January. Food prices slightly declined to 3.1% due to slower growth in certain consumer goods, while housing prices increased at a slower pace of 1.8%, with rental price growth at its lowest since March 2023 and new home construction slightly slowing. Electricity prices dropped significantly due to state tax relief measures. Core inflation, which excludes volatile food and energy prices, eased to 2.7% from 2.9% in January.

Australia’s 10-year government bond yield remained high at 4.51%, its highest level in five weeks, despite signs of cooling inflation. Investors widely expect the RBA to keep rates unchanged. Meanwhile, markets see a 64% chance of a rate cut in May, though the central bank has signaled that further cuts may not follow after last month’s rate reduction.

Techical analysis data (5H)

Resistance: 1.5926, 1.5944, 1.5977

Source: Investing.com

Buy/Long 1: If the price touches support in the price range of 1.5842 - 1.5875 but cannot break the support at 1.5875, you may set a TP at approximately 1.5944 and SL at around 1.5824 or according to your acceptable risk.

Buy/Long 2: If the price breaks the resistance in the price range of 1.5926 - 1.5944, you may set a TP at approximately 1.5977 and SL at around 1.5842 or according to your acceptable risk.

Sell/Short 1: If the price touches resistance in the price range of 1.5926 - 1.5944 but cannot break the resistance at 1.5926, you may set a TP at approximately 1.5842 and SL at around 1.5977 or according to your acceptable risk.

Sell/Short 2: If the price breaks the support in the price range of 1.5842 - 1.5875, you may set a TP at approximately 1.5824 and SL at around 1.5944 or according to your acceptable risk.

Pivot point March 29, 2025 07:40 PM. GMT+7