SYDNEY - A private gauge of Australian inflation out on Monday showed price pressures remained well contained in April, merely adding to expectations that interest rates will be cut this week.

The Reserve Bank of Australia (RBA) holds its monthly policy meeting on Tuesday and is widely expected to take advantage of lower inflation by cutting its cash rate a quarter point to 4 per cent, the first easing since December.

The central bank was given a green light for a cut when official data showed inflation running well below expectations in the first quarter, thanks in large part to the strength of the local dollar.

The TD Securities-Melbourne Institute's measure of consumer prices rose by 0.3 per cent in April, following a 0.5 per cent rise in March. The annual pace stood at 1.9 per cent, under the RBA's long-term target of 2 to 3 per cent.

The survey's measure of underlying inflation rose 0.4 per cent in April, which nudged the annual pace up to 2.3 per cent, from 1.9 per cent.

The government's own measures out last month showed consumer price inflation slowed to just 1.6 per cent in the year to March, while underlying inflation dipped to a decade-low of 2.15 per cent.

That was slower than anyone had expected, including the RBA, and is why all 22 economists in a Reuters poll expect rates to be cut on Tuesday.

"A measured 25 basis-point downward adjustment sends the correct signal that accommodative lending rates are appropriate, given that growth and inflation are increasingly likely to be sub-trend this year," said Annette Beacher, head of Asia Pacific research at TD.

"We expect a follow-up reduction in early June to 3.75 per cent after the RBA absorbs the extent of fiscal tightening that lies ahead in the May 8 Commonwealth Budget," she added.

The Labor government has warned of tough spending cuts and revenue measures aimed at getting the budget back to surplus in 2012/13, years before most other developed nations.

The March inflation gauge showed price increases for automotive fuel, rents, and health. The price of fuel rose by 3.1 per cent in April, after a 3.5 per cent increase in March.

These were partly offset by falls in holiday travel and accommodation, and recreation and culture, and clothing and footwear.

The gauge again showed a high Australian dollar was helping contain inflation by driving down prices for imported goods. The index of prices for tradable items, or those set by global markets, fell 0.2 per cent in April to be up just 0.1 per cent for the year.

In contrast, inflation for non-tradable items, mainly services such as education, utilities and health, stayed uncomfortably high. Non-tradable prices jumped 0.7 per cent in April to be up 3.2 per cent for the year.

The stubbornness of non-tradable inflation is one reason the RBA might be reluctant to cut rates by a full 50 basis points this week.