Hauser warns of worsening Australian inflation outlook with rates at 4.60%

Key Facts

Reserve Bank of Australia Deputy Governor Andrew Hauser warned of a marked deterioration in the inflation outlook as the Australian dollar approached a 3-week high against the U.S. dollar during trading on 21 October 2026. Hauser said the price outlook had become "materially worse", according to Reuters, as the bank continued preparing its new quarterly economic forecasts. But he remained unsure whether tackling these pressures would require another interest rate increase next month. His remarks come as the bank faces rising headline inflation on one hand and falling employment on the other. The assessment kept the prospect of further tightening alive, without Hauser settling the need for a hike before the new forecasts are completed.

In its assessment of the monetary policy outlook, Goldman Sachs now sees a November rate hike as more likely than no increase, according to Reuters' coverage of Hauser's remarks. The bank made that assessment conditional on the next inflation reading delivering no downside surprise, leaving its forecast dependent on the path of prices before the meeting. The Reserve Bank of Australia raised its target interest rate by 25 basis points at its previous meeting in September to 4.60%, according to the decision statement. Minutes of that meeting showed board members unanimously backed the increase, marking a tightening step that preceded the latest warning of a worsening inflation outlook. Goldman's forecast of another increase thus follows a hike already approved by the board, while Hauser himself leaves the need for an additional move unresolved.

On prices, the Australian Bureau of Statistics reported annual headline inflation of 4.0% in August, compared with 3.5% in July. Annual trimmed mean inflation, meanwhile, held at 3.6% in August, unchanged from the previous month. Housing was the largest contributor to annual inflation, with prices in the category rising 5.7%, according to the bureau's consumer price statement. Major contributors to the increase in housing costs included new dwelling prices, which rose 5.4% in the year to August. Electricity prices climbed 13.2% year on year, among the main components contributing to the category's higher costs. Rents also rose 3.6% over the same period, adding to the pressures from new dwellings and electricity identified by the statistics bureau.

Alongside rising housing costs, the central bank identified global and domestic price pressures in documents from its previous meeting in September. The minutes noted that oil prices were significantly above the level the bank had assumed when preparing its August forecasts. They added that excess demand for artificial intelligence-related products was another driver of global cost pressures. Domestically, the bank said in its rate decision statement that "pressures on domestic capacity remain". These factors form the backdrop to Hauser's latest assessment as the bank prepares its quarterly forecasts after he described the inflation outlook as materially worse.

The labour market, meanwhile, recorded a decline in employment in September alongside a rise in the seasonally adjusted unemployment rate, according to the Australian Bureau of Statistics. Employment fell by 39,300 during the month, according to the seasonally adjusted employment series published by the bureau. The unemployment rate in the same series rose 0.1 percentage point to 4.7% in September. In trend terms, the unemployment rate held at 4.6% that month, according to the bureau's separate labour market statement. These developments place weaker employment alongside persistent price pressures in the backdrop to the next rate decision, with Hauser yet to determine whether further increases will be required.

The next milestone is 28 October 2026, the scheduled date for updated inflation data, according to the Reserve Bank of Australia's official website. The reading precedes the November meeting, which Goldman Sachs expects to deliver a rate hike unless prices spring a downside surprise. The monetary policy decision is due on 3 November 2026 at 2:30 p.m. Australian Eastern Daylight Time, according to the bank's official schedule. At the same time, the bank will publish its Statement on Monetary Policy containing its new forecasts, which were still being prepared when Hauser spoke. The statistics bureau has scheduled the release of October labour market data for 19 November 2026, after the rate decision and new quarterly forecasts.