In a fireside chat at the Regional Australia Institute’s Regions Rising National Summit, Reserve Bank of Australia Assistant Governor for Economic Sarah Hunter said inflation remains above target and risks are skewed to the upside. Higher fuel prices linked to the Middle East conflict, a potentially more inflationary global environment and weak domestic productivity growth could add to price pressures. Household spending is holding up, and business investment is increasing partly because of artificial intelligence data centers and renewable energy projects, while the housing market correction is expected to restrain economic growth and residential construction. Regional economies face distinct pressures. Regional house prices have generally declined less than those in capital cities, reflecting constrained housing availability, while regional unemployment rates have risen by less and labor shortages remain more acute. Regional businesses and households are also more exposed to higher fuel and diesel costs. Hunter said the RBA has not identified systemic stress in any particular business sector, and the average mortgaged household remains supported by payment buffers. The RBA will incorporate developments in oil and fuel prices into its November forecast update. Its biannual Financial Stability Review, due after the next Monetary Policy Board meeting, will assess vulnerabilities among households and businesses.

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