Australia's Inflation Outlook Materially Worse, RBA Says

By James Glynn

SYDNEY--Australia's inflation outlook is "materially worse" and coming third quarter inflation data are likely to confirm that view, Andrew Hauser, deputy governor of the Reserve Bank of Australia said Wednesday.

The comments come ahead of a policy meeting at the RBA in early November, where bond traders had cooled on the prospect of a further rise in interest rates.

Hauser warned that the RBA's liaison with business shows many firms are passing on higher costs, which threatens to entrench higher inflation expectations.

"The inflation outlook looks materially worse than we expected in the August ... inflation has been coming in a little above expectations despite an easing in the labor market," he said.

"We hear from liaison that costs pressures are the number one consideration ... There are an increasing number of firms that think inflation at 3.0% to 3.5% is the new norm," he added.

The RBA has raised interest rates four times this year with inflation still hovering around 4.0%, well above the target of 2.5%.

Against that backdrop, unemployment has been rising, but Hauser said the job market was only "a little weaker" and that the jobless rate remains historically low.

Key inflation data due next week are likely to show that price pressures are stronger than the RBA had forecast, given rising fuel costs and an investment boom in the artificial intelligence sector.

Still, demand growth is cooling due to higher interest rates and the impact of higher fuel costs, he added.

"Monetary policy is working, the labor market is easing, consumption growth is quite tepid, but there are pockets of growth," he added.

"The inflation outlook is deteriorating. That's a pretty tricky balance," Hauser said.

Write to James Glynn at james.glynn@wsj.com

(END) Dow Jones Newswires

October 20, 2026 19:20 ET (23:20 GMT)