Australian Central Bank Deputy Warns Inflation Outlook Has Worsened

Reserve Bank of Australia deputy governor Andrew Hauser warned on Wednesday that the inflation outlook "looks materially worse" than the bank had expected two months earlier, and that policymakers faced "hard choices" ahead. The Guardian reported that his remarks revived talk of a fifth interest rate hike this year.

Before Hauser spoke on Wednesday morning, financial markets were pricing in a nearly one-in-three chance that the RBA would raise its cash rate to 4.85%. The cash rate is the benchmark interest rate the central bank sets, and it feeds into the cost of loans across the economy. It stood at 4.60% in October, according to Reuters.

The RBA's inflation target is 2.5%. Hauser said some businesses had begun to treat 3.5% inflation as the "new normal," and that removing an entrenched inflation psychology, meaning a lasting expectation that prices will keep rising, could require higher interest rates. He also pointed to oil prices, which were about a third higher than the bank had forecast in August.

Hauser said high interest rates and high petrol prices were weighing on economic activity. He added that last week's jobs figures were a little weaker than expected. Unemployment reached 4.7% in the figures released in mid-October, its highest in nearly five years.

The tension between those threads is central to the debate. Higher rates are the bank's main tool for cooling price rises, but the same rates are already weighing on activity, and the jobless rate has risen. Hauser's comments in September were reported by ABC, which quoted him saying the public was furious about inflation and that interest rates could rise further if inflation was not brought under control.

The RBA's monetary policy board begins a two-day meeting on 2 November 2026. Reuters reported that the board will decide on 3 November whether to raise the cash rate from 4.60% for a fifth time in 2026.