Reserve Bank of Australia Deputy Governor Andrew Hauser said in a fireside chat that inflation remains too high and warned that the central bank would have to raise interest rates again if upside risks materialize and inflation does not decline. He reiterated that the Monetary Policy Board judged rates appropriate for now at its previous meeting, following three increases in 2026. Key risks include the Middle East crisis and energy prices, the global artificial intelligence and technology boom, and weak domestic capacity and productivity growth. The RBA expects monetary tightening to slow demand without causing a contraction. Consumption is forecast to grow by about 1.5% a year and employment by about 1%, with no decline in the number of jobs. Productivity growth of about 0.7% in 2026 and 2027 implies an economic growth speed limit of roughly 2% a year. Hauser also noted that infrastructure investment adds to productive capacity over time but can intensify near-term inflation through demand for workers, construction and housing. The RBA would ordinarily look through a temporary supply shock, but higher rates may be required where demand already exceeds supply, shocks are persistent or volatile, or price increases become embedded in expectations and costs.
2026-08-19Reserve Bank of Australia
Reserve Bank of Australia Deputy Governor warns another rate increase may be required if upside inflation risks materialize
Reserve Bank of Australia Deputy Governor Andrew Hauser warned that another interest rate increase may be required if inflation does not fall and upside risks materialize. Rates were judged appropriate for now after three increases in 2026, but risks remain from energy prices, the global technology boom and weak domestic supply growth. The RBA forecasts slower but continued growth in consumption and employment.