Australia's rapid economic recovery has resulted in renewed inflation pressures, which may force the Reserve Bank to raise the cash rate again next week.
The March quarter consumer price index (CPI), released today, showed prices grew by a larger than expected 0.9 per cent, lifting the annual rate to 2.9 per cent.
This is at the upper end of the Reserve Bank's two to three per cent inflation target band.
Economists' forecasts for CPI had centred on a 0.8 per cent rise in the March quarter, for an annual pace of 2.8 per cent.
The more policy-sensitive measures of inflation - the trimmed-mean CPI and the weighted median CPI - rose by an average 0.8 per cent for an annual rate of 3.05 per cent.
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Economists had expected an average rise of 0.7 per cent in the March quarter, for an annual pace of 3.0 per cent.
No room for complacency on inflation: Swan
Federal Treasurer Wayne Swan said there would be an impact on families from some "one-off" increases in the cost of health and education but added that measures of underlying inflation had continue to ease.
"Measures of underlying inflation continue to ease ... and that is encouraging," he said.
Mr Swan said the government knew cost of living increases were hard for families.
Through tax cuts, childcare and education rebates, the government was doing all it could to mitigate their impact.
"This government has had very much a cost of living agenda in place for working families because we understand it can be tough ... when the bills come in," he said.
