Why did petroleum prices jump so sharply in the PPI?

The producer index for petroleum refining and fuel manufacturing recorded a strong quarterly rise, reflecting higher global oil prices over the period. Analysts link that increase to recent geopolitical tensions in the Middle East, which have tightened supply and pushed up energy costs worldwide.

What exactly is the Final Demand Index?

The Final Demand Index is the Australian Bureau of Statistics’ headline Producer Price Index measure, tracking price changes for goods and services as they leave the place of production, excluding exports. It captures upstream or “pipeline” inflation from the seller’s perspective, rather than consumer prices at the checkout.

How weak was the March 2026 producer inflation result?

In the March 2026 quarter, final demand rose 0.4 per cent, taking annual growth to 3.0 per cent. According to the ABS, that quarterly increase is the weakest since March 2021, indicating a clear moderation from the stronger producer price rises seen through 2022 and 2023.

How did construction influence producer prices this quarter?

Construction‑related output and property services were among the main contributors to the quarterly rise in final demand, in line with ongoing strength in residential building and housing‑related activity. That means upstream cost pressures remain firm in sectors tied to the housing cycle.

What role did services like education and transport play?

Education services contributed to higher producer prices, with higher education export fees rising as annual price adjustments were applied. By contrast, air and space transport prices fell around 4 per cent as passenger travel eased after the summer holiday period, providing a partial offset to gains elsewhere.

How does this PPI result relate to consumer inflation and the RBA?

While producer prices rose modestly, consumer inflation was stronger, with the CPI up 4.6 per cent over the year to March 2026 and 1.4 per cent in the quarter. Economists expect the Reserve Bank to weigh the softer PPI alongside the higher‑than‑expected CPI when assessing how quickly overall inflation is likely to return to target.

Australian producer prices hit a three-year low in the March quarter

Written by Liezl GambePublished May. 1 2026Last Updated May. 1 2026

Fresh data from the Australian Bureau of Statistics (ABS) reveals that producer price inflation cooled markedly during the March 2026 quarter.

The Final Demand Index - a measure of price changes for goods and services as they exit the production cycle - edged up by just 0.4% for the quarter, bringing the annual growth rate to 3.0%.

This is the weakest quarterly movement since March 2021, suggesting a moderation in broader inflationary pressures.

Despite the cooling trend, specific sectors experienced significant volatility.

The most dramatic spike occurred in petroleum refining and fuel manufacturing, which surged around 10%, in line with elevated global oil prices following recent tensions in the Middle East.

Construction remained a key driver of upstream inflation, with building‑related output rising as demand for residential housing and property operations persisted.

Education also contributed to the upward trajectory, with higher education export fees jumping by more than 5% as institutions implemented annual price adjustments.

In manufacturing, output prices rose, supported by non‑ferrous metal products, while a stronger Australian dollar helped contain some imported input costs.

Meanwhile, the air and space transport sector provided a significant offset, falling about 4% as passenger travel eased after the summer holiday peak.

Taken with the recent rise in consumer prices, the subdued PPI outcome underlines a shifting inflation mix, with upstream costs moderating even as energy and housing continue to drive headline CPI.