Odds of Australian Rate Hike Reach 40% as Hauser Warns on Higher Oil Prices

Key Facts

The probability of an Australian interest rate increase in November reached about 40%, up from 30% at the start of the week, according to Reuters, as Reserve Bank of Australia Deputy Governor Andrew Hauser warned that oil prices had risen above the bank's assumptions. Hauser said prices were now about a third higher than the level underpinning its August forecasts. He was speaking at the Citi Australia and New Zealand Investment Conference, which the bank listed among its events in Sydney on 21 October 2026. His warning covered energy prices and companies' perceptions of inflation levels as the bank's economists were finalising their economic forecasts. Even so, Hauser said, according to Reuters, that he did not know for certain what the bank's board would decide at its next meeting.

On corporate behaviour, Hauser said a growing number of companies had come to regard inflation of between 3.0% and 3.5% as normal, according to Dow Jones. He added: "There is a growing number of companies that think inflation between 3.0% and 3.5% is the new normal." The bank said in its September statement that measures of short-term inflation expectations remained elevated, alongside other drivers of price pressures. The statement identified demand linked to artificial intelligence as a driver of rapid growth in global prices for technology-related goods. The concerns outlined by the bank in September and Hauser in October thus extended from prices for technology goods and energy to the price levels companies expect.

On actual prices, annual headline inflation accelerated to 4.0% in August from 3.5% in July, according to the Australian Bureau of Statistics. In the same month, annual trimmed mean inflation remained at 3.6%, unchanged from July. The rise in the headline index coincided with a steady trimmed mean, while the bank's August forecasts mapped a path for inflation to return to 2.5% by early 2028. The August assessment described monetary policy as "somewhat restrictive", reflecting its assessment of economic conditions at the time. Hauser, meanwhile, said in his latest remarks that monetary tightening was slowing the economy, as work continued on the forecasts that will underpin the bank's next assessment.

The bank's board unanimously raised the target interest rate by 25 basis points to 4.60% at its September meeting, according to the minutes. After the decision, Governor Michele Bullock said domestic spending and investment had been stronger than the bank expected, describing the drivers of activity within Australia. She added that productivity growth remained weak, while the labour market was still somewhat tight. Her remarks thus combined strength in spending and investment with weak productivity growth and continued labour market tightness. The rate increase at that meeting followed the August assessment that described policy as somewhat restrictive and preceded Hauser's remarks on the effect of tightening in slowing the economy.

September labour market data showed diverging movements in full-time and part-time employment, according to the Australian Bureau of Statistics. Full-time employment rose by 34,400 people to 10,232,400, according to the seasonally adjusted figures in the bureau's release. By contrast, part-time employment fell by 73,700 people in the same month, a decline that exceeded the increase in full-time employment. The labour force participation rate fell by 0.2 percentage points to 66.8%, according to the bureau's September media release. At the same time, the underemployment rate rose by 0.1 percentage points to 6.3%, after Bullock had described the labour market following the September decision as still somewhat tight.

The Australian Bureau of Statistics will release the complete monthly Consumer Price Index for September on 28 October 2026 at 11:30 a.m. Australian Eastern Daylight Time. The release follows the August reading, which combined accelerating headline inflation with an unchanged annual trimmed mean rate. The Reserve Bank of Australia will then announce its next monetary policy decision on 3 November 2026 at 2:30 p.m. in the same time zone, according to the bank's schedule. The bank will also publish its Statement on Monetary Policy, containing its updated economic assessment, at the same time, after its economists complete work on the forecasts. The November announcement will follow September's unanimous increase, while Hauser left his position on the next decision open by saying he did not know for certain what the board would decide.