Australian Rate Hike Odds Near 50% as Hauser Warns of Worsening Inflation Outlook
Key Facts
Reserve Bank of Australia Deputy Governor Andrew Hauser warned that Australia's inflation outlook had become "materially worse", in remarks reported by Reuters on 21 October 2026. The agency reported that markets were pricing in a nearly 50% chance of a rate increase in November amid the deterioration in the price outlook. The probability of a hike stood at 30% at the start of the week of his remarks, according to the comparison Reuters cited in its update. Markets are pricing in a rate of 4.85% next month if an increase goes ahead. But Hauser expressed uncertainty over whether another increase would be needed in November, leaving the potential hike under consideration ahead of the next monetary policy meeting.
Hauser's remarks follow the Reserve Bank of Australia's decision on 29 September 2026 to raise its target interest rate by 25 basis points to 4.60%. The bank said in its decision statement that board members unanimously supported the increase, its latest move on borrowing costs. On prices, the Australian Bureau of Statistics reported that annual headline inflation reached 4.0% in August. Annual consumer price growth accelerated from 3.5% in July, according to the bureau's data. Meanwhile, annual trimmed mean inflation held at 3.6% in August, unchanged from July.
The minutes of the September meeting had identified price pressures from energy, technology and labour costs as part of the board's discussions of economic developments. The minutes said global energy prices had significantly exceeded the assumptions underpinning the bank's August forecasts. In Australia, businesses reported sharp increases in software and other information technology costs, according to the board's account in the minutes. Members also discussed higher growth in unit labour costs, attributing it more to weak productivity growth. The board's explanation for the increase was linked more to productivity performance than to strong nominal wage growth.
The bank's concerns extended to businesses' expectations for inflation, alongside the pressures it identified in production and operating costs. Surveys discussed by the Monetary Policy Board in September showed an upward trend in businesses' short-term inflation expectations. Those surveys also showed an upward trend in their medium-term expectations, according to the meeting minutes. In his latest remarks, Hauser said a growing share of businesses viewed inflation of around 3.5% as "the new normal", according to the Australian Associated Press. The deputy governor stressed the need to counter that shift, saying: "We cannot allow expectations to drift away from the target."
In the labour market, Australian Bureau of Statistics data showed employment fell in September while the number of unemployed people increased. Employment declined by about 39,000 from the previous month, according to the bureau's employment figures. At the same time, the number of unemployed people rose by about 9,000 during the month, according to the same release. The seasonally adjusted unemployment rate reached 4.7% in September, the bureau's latest monthly reading. The trend unemployment rate, meanwhile, remained steady at 4.6%, alongside the decline in employment during the month.
The next milestones begin with the release of Australia's September consumer price index on 28 October 2026, according to the statistics bureau's schedule. The reading is due at 11:30 a.m. Australian Eastern Daylight Time, ahead of the next monetary policy meeting. The Reserve Bank of Australia's Monetary Policy Board meets on 2–3 November 2026, with its decision to be announced on the second day. The meeting outcome will be announced alongside the November quarterly Statement on Monetary Policy, according to the bank's publication schedule. The bank will then publish the meeting minutes two weeks later, in line with its established schedule for releasing monetary policy meeting minutes.