The quarterly Australian consumer price index was above economists\' estimates of a 1.2% rise.
Australian inflation rose more than expected in the first quarter due to natural disasters and higher petrol prices, data
showed Wednesday, fuelling speculation of an interest rate rise.
The consumer price index hit 1.6 percent quarter-on-quarter in March, above estimates of a 1.2 percent spike, and rose 3.3 percent from a year earlier to be well beyond the central bank\'s two to three percent target range.
It was the biggest quarterly move in five years and sent the Australian dollar soaring to a record $1.0851 against the greenback.
Core inflation, which is crucial to policy making at the Reserve Bank of Australia, rose by an average of 0.9 percent in the first quarter, easily beating an expected rise of 0.6 percent.
Treasurer Wayne Swan played down the figures, saying it was not surprising given the devastating floods and cyclones in Queensland in January that wiped out crops and sent the price of fruit up 15.3 percent in the quarter to March.
The cost of vegetables rose 16 percent.
\"We can take some comfort that in coming quarters we will see some of these price increases unwind as crops regrow and production returns,\" he said.
As well as a jump in fruit and vegetable prices, fuel rose 8.8 percent, contributing about 0.3 percentage points to the quarterly CPI increase.
Despite the effect on Australian pockets, Swan said economic fundamentals remained strong.
\"This summer\'s disasters have not knocked our economy off course,\" he said.
\"We have got strong job creation, we have got low unemployment, we have got solid public finances and a huge pipeline of investment that\'s flowing from record high export prices.\"
The treasurer said underlying inflation, which excludes volatile price items, was actually low.
\"Underlying inflation demonstrates that when you strip out the spike that\'s been caused by the disasters, it is still around its lowest level in a decade,\" he said.
Swan would not comment on a possible interest rate rise, although he pointed out that the central bank has repeatedly said it will look through the anticipated impact from natural disasters when considering monetary policy.
The Reserve Bank last hiked the cash rate in November 2010, to 4.75 percent, in a pre-emptive move against inflation amid the threat of rising commodity prices and a tightening labour market.
Australia, the first major western economy to raise interest rates after the global slump, has raised the cash rate by 175 basis points since October 2009 as it rides a mining boom driven by Asian demand, helping it dodge recession.