Reserve Bank of Australia Assistant Governor for Economic Sarah Hunter said during a fireside chat at the AFR Property Summit that the Monetary Policy Board may need to raise interest rates again if inflation proves stronger than forecast. Inflation remains above target and risks are skewed upward, with recent oil price increases exceeding assumptions in the August Statement on Monetary Policy and July data showing strength in domestic components including market services, new dwelling construction costs and rents. Hunter said the housing downturn is part of monetary policy transmission but is not expected to cause a recession under the central bank’s baseline forecast. Lower housing turnover is already affecting property related services, while the effect of declining household wealth on consumption is expected to be relatively small unless house prices fall substantially and remain depressed for one to two years. Dwelling construction activity is forecast to decline in late 2027 and 2028, which could constrain housing supply and add pressure to local rental markets. Strong data center investment is partly offsetting the housing slowdown and has contributed to double digit business investment growth over the past nine to 12 months, although much of the equipment is imported. The central bank is also monitoring rapidly growing private credit but does not currently see signs of systemic financial stress.
2026-09-08Reserve Bank of Australia
Reserve Bank of Australia signals another rate rise may be needed as inflation risks remain skewed upward
Reserve Bank of Australia Assistant Governor Sarah Hunter said another rate rise may be needed if inflation exceeds the central bank’s forecast, with risks skewed upward and oil prices above August assumptions. The housing downturn is expected to slow activity, including through lower turnover and weaker construction, but a recession is not the baseline forecast. The central bank does not currently see systemic stress from private credit.