Inflation has surged to its highest level in almost three years as borrowers brace for a potential third consecutive interest rate hike to start the year.

New data from the Australian Bureau of Statistics released this morning showed the consumer price index rose 4.6 per cent over the 12 months to March, up from 3.7 per cent in February.

While that was slightly lower than economists' expectations, it remains far higher than the Reserve Bank's target band of 2-3 per cent, and is the worst figure since 2023, when inflation was coming down from a peak of more than 7 per cent.

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The surge was driven primarily by skyrocketing petrol prices caused by the war in Iran and ensuing closure of the Strait of Hormuz.

According to the ABS, fuel costs rose a whopping 32.8 per cent in March – the highest monthly rise on record.

However, in a silver lining for borrowers fearing another rate hike, the trimmed mean – the RBA's preferred measure of underlying inflation – remained steady at 3.3 per cent.

Prior to today's data, financial markets had been pricing in a roughly three-quarters chance of an interest rate rise when the RBA's monetary policy board meets next week, and all big four banks are forecasting a hike.

Nine's Political Editor Charles Croucher said transport costs have been one of the key drivers of an unprecedented rise in monthly inflation.

"This is coming from the bowser, and it's jumping on board the inflation that was already outside the RBA's target band," Croucher said.

"We were already in a bad spot, this has just made it a whole lot worse."

Croucher warned that yet another rate hike at the Reserve Bank's May meeting is "almost inevitable".

Oxford Economics Australia economist Harry McAuley agreed that unwelcome rate announcements are likely to be on the agenda next month.

He said oil price shocks are a central bank's "worst nightmare" and that the RBA has a long road ahead to push the soaring inflation down.

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"But the longer the Strait remains closed, the fewer options the board will have; a prolonged closure would force the RBA's hand to hike rates multiple times this year to tame inflation and inflation expectations," McAuley said.

Inflation will get worse: Chalmers

The inflation figure may increase even further before it drops again as the Iran war continues, Treasurer Jim Chalmers said.

Chalmers addressed the media following the announcement of a 4.6 per cent inflation and offered a grim prediction for the next few months.

"This war could drive inflation up even higher before it comes back down again," he said.

"Treasury's expectation is that inflation is likely to peak higher than this, but they are still finalising their forecasts ahead of the budget next month."

But in a small triumph for the government's fuel-saving measures, Chalmers said inflation would have been even higher if the excise had not been halved.

"For the next couple of months, our fuel excise cut has been a very important factor, taking some of the sting out of fuel prices, and that's reflected in the movement in fuel prices," he added.

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A third man has been charged over an alleged kidnapping where a 53-year-old man had to be saved by a police raid on a Sydney home.

The man was allegedly snatched from outside a tobacco shop he owned in Mount Pritchard on February 24, with CCTV footage showing four men in balaclavas approaching him.

The group then allegedly assaulted the victim and forced him into a Hyundai hatchback.

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He tried to fight them off but was unable.

The man was allegedly taken to a property at Dural on Sydney's north-west fringes, but a covert police operation on February 26 led to his freedom.

The victim was not injured and in a stable condition when he was taken to hospital.

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A teenager and a man were previously arrested and charged with kidnapping offences, and now a third person, a 27-year-old man, has been arrested in Surry Hills.

He was taken to Surry Hills Police Station, where he was charged with multiple offences, including take and detain in company with intent to ransom and occasion actual bodily harm, and participating in a criminal group and contributing in criminal activity.

He was refused bail to appear in court today.

There is one individual seen in the CCTV footage who is yet to be found.

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