Reserve Bank of Australia Deputy Governor says renewed inflation drove reversal of 2025 rate cuts and estimates sustainable growth near 2 per cent

The Reserve Bank of Australia published a fireside chat transcript in which Deputy Governor Andrew Hauser explained the policy logic behind the bank’s 2025 rate path, arguing that the three rate cuts early that year were justified by slow growth, inflation moving into the target band and expectations that global tariff changes would weaken activity, but were later reversed when inflation picked up again in the second half of the year. He said the tightening reflected three main factors: the global economy proved stronger than expected, Australia’s supply capacity was weaker than assumed, and broader financial conditions remained easy through bank lending and offshore market funding. Hauser also said the bank sees Australia’s sustainable growth rate, or economic speed limit, at around 2 per cent a year, made up of about 1.25 per cent population growth and 0.75 per cent underlying productivity growth. He described the Reserve Bank of Australia’s growth forecast as only slightly weaker than Treasury’s, with inflation and unemployment projections broadly similar, and linked the difference mainly to a view that capacity pressures are somewhat stronger than Treasury assumes. He reiterated that monetary policy is set against aggregate demand and inflation across the whole economy rather than particular sectors, while productivity outcomes depend largely on business investment, competition and dynamism rather than central bank decisions.