The RBA’s deputy governor has made a fresh inflation warning, sharpening expectations that the cash rate could climb further.
Reserve Bank of Australia (RBA) deputy governor Andrew Hauser has warned that persistent inflationary pressures and stronger-than-expected economic data could require the central bank to lift interest rates again, as major-bank economists increasingly converge on another cash-rate increase this year.
In an interview with the ABC’s 7.30, Hauser said inflation remained the RBA’s overriding concern after the central bank raised the cash rate three times earlier this year, questioning whether the existing 75 basis points of tightening would be enough to return price growth to target.
“We have one big problem and that’s inflation,” Hauser said.
“Inflation is too high, and that’s why we raised interest rates three times at the beginning of this year. And the question now, frankly, for us, is have we done enough or is more needed?”
The deputy governor’s remarks follow data releases that have complicated the RBA’s path back to its 2–3 per cent inflation target.
Trimmed mean inflation, the RBA’s preferred gauge of underlying price pressures, was running at 3.6 per cent in July, well above the top of the target range, while recent national accounts data showed the economy had also grown more strongly than forecast.
“We’ve had an inflation number actually a couple of weeks ago, and it was a little stronger than we’d expected and the market expected,” he said.
“And the GDP growth numbers that came out last week were also a bit stronger. So both of those are going to be in the mix.”
Inflation risks in focus
While Hauser stopped short of signalling a predetermined outcome for the next board meeting, he made clear that policymakers would respond with higher rates if their forecasts no longer showed inflation returning to the target band.
“We’re not at that point yet, but some of these upside risks to inflation are certainly on our mind, and I come back from the US a bit more worried about them than I did when I went,” Hauser said.
He identified three areas of concern: the conflict in the Middle East, the rapid global investment cycle around artificial intelligence, and weak productivity growth.
“People want inflation down. People are furious about inflation. I understand why,” he said.
“It’s unfair. It hits people on low incomes. It damages price signals. It makes the job of companies difficult. What they want us to do is our job and bring inflation down.
“Everywhere I go, I hear cost, cost, cost, inflation, inflation, inflation, and that’s our responsibility. We have to put that right.”
Balancing inflation and employment
Hauser also offered a blunt depiction of the trade-off the RBA faces as it seeks to lower inflation without unnecessarily damaging the labour market.
“We could raise interest rates sharply and we could do it tomorrow,” Hauser said.
“We could decide, ‘You know what? We no longer take seriously the full employment part of our objective. We’re going to bring inflation down come hell or high water.’”
The remarks have added weight to an already shifting outlook among bank economists.
Westpac on Tuesday abandoned its extended-hold cash-rate forecast and now expects the RBA to lift the cash rate by 25 bps to 4.60 per cent in November.
The revision means all four major banks now expect at least one further increase this year.
National Australia Bank (NAB) is forecasting a 25-bp increase at the 28–29 September board meeting, while the Commonwealth Bank of Australia (CBA) and Australia and New Zealand Banking Group (ANZ) have also moved away from extended-hold calls and identified November as the most likely timing for the next rise.
Macquarie Bank tips September hike
Macquarie Bank has gone further, with its chief economist Ric Deverell announcing on Wednesday that the bank was now forecasting a 25-bp increase to 4.60 per cent after the RBA’s September meeting.
“The RBA has run a monetary experiment over the past couple of years, hiking less than other central banks during 2022 and 2023 in an attempt to hold onto part of the fall in unemployment that occurred during COVID,” he said.
“In the first half of 2025, it looked like the experiment had worked, with underlying inflation returning to the middle of the target band, allowing the RBA to claim victory by easing policy by 75 basis points.”
However, Deverell said inflation and growth strengthened again in the second half of 2025, requiring the RBA to reverse course and lift rates this year.
“However, over the second half of 2025 both growth and inflation rebounded, forcing a reversal of the earlier cuts as the RBA acted to slow growth,” he said.
“The 75 basis points of tightening earlier this year is working, with growth in recent quarters below trend.
“However, with unemployment still around three-quarters of a percentage point below the pre-Covid level, the RBA now seems to feel that output remains above the economy’s potential, suggesting that more needs to be done to bring inflation back to target.”
Deverell said Hauser’s latest remarks had strengthened Macquarie’s conviction that policymakers were leaning towards further action.
“It provided a clear steer on which side of the fence RBA staff have landed,” he said.
[Related: Westpac flips as majors line up behind rate rise call]
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