RBA Deputy Governor Lays Out Clear Path to Another Rate Hike
Hauser's conditional warning on inflation and three upside risks, from oil to AI, sets up a clear test for upcoming data.
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RBA Deputy Governor Andrew Hauser sharpened the central bank's tightening warning on Wednesday. Another rate increase would follow if inflation stops improving, he said at an event in Queensland. "If those upside risks to inflation crystallise and we don't see inflation coming down, we will have to raise interest rates again and we will do so."
The message reinforces the RBA's August decision to retain explicit tightening optionality. That came even after the central bank held the cash rate at 4.35%, following 75 basis points of increases since February.
Hauser flagged three upside risks: the Middle East conflict, the global AI boom, and weak productivity growth. The Middle East risk has become more relevant as oil prices climb again, potentially feeding energy and transport costs into inflation. AI investment supports demand and competes for resources. Poor productivity limits the economy's ability to grow without generating additional price pressure. Together, these risks leave the RBA unwilling to assume recent disinflation will continue automatically.
Tighter monetary policy is already slowing the economy, Hauser acknowledged. The RBA has seen "a bit of a slowdown in consumption and employment growth," he said, adding that policymakers "need to see more still." He rejected a more severe characterization of current conditions: "That is not a slump. It is not a depression… but it's a lot slower than Australia has known in the past and it's a lot slower than recently."
Recent softer inflation readings and weaker housing conditions matter. The RBA does not yet appear convinced demand has cooled enough to neutralise the upside risks.
Markets are reflecting that uncertainty. They are pricing around a 60% chance of another increase to 4.60% by December as renewed oil strength brings imported inflation risks back into focus. Hauser's remarks do not make another hike inevitable. They clarify the RBA's reaction function: continued disinflation allows policy to stay on hold; stalled inflation combined with materialisation of oil, AI, or productivity risks would bring tightening back.
Upcoming inflation and labor-market data will decide which side of that conditional warning becomes relevant.
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