The Reserve Bank of Australia (RBA) has signalled that borrowers should not expect any quick relief on interest rates, despite November’s unexpectedly soft inflation figures.
Data released on Wednesday by the Australian Bureau of Statistics (ABS) showed the consumer price index (CPI) was flat for the month, slowing the annual rate from 3.8 per cent to 3.4 per cent. This result came below market forecasts of 3.6 per cent, sparking hopes that the central bank might delay further interest rate hikes.
However, RBA Deputy Governor Andrew Hauser told the ABC on Thursday that the figures offered “wasn’t a lot of news” for the bank. He emphasized that the likelihood of further rate cuts in the near term remained very low, echoing comments by RBA Governor Michele Bullock following the December meeting.
“I know that won’t be the message that everyone watching this will want to hear,” Mr Hauser said, underlining the bank’s cautious approach.
Economists caution that the November CPI provides limited guidance for monetary policy. The ABS’s newer monthly inflation measure has a short historical record, making seasonal adjustments less reliable. Instead, market attention will focus on the December quarter trimmed mean CPI, due January 28. This measure excludes volatile items, such as electricity, which have fluctuated sharply due to government energy rebates.
Commonwealth Bank economist Harry Ottley said the November numbers suggest the quarterly trimmed mean could reach 0.9 per cent, a figure “uncomfortable” for the RBA that might compel a 25-basis-point cash rate hike. Underlying inflation, measured by the trimmed mean, remains at 3.2 per cent—above the bank’s 2-3 per cent target—while rents and dwelling construction costs continue to climb.
The persistence of inflation in housing-related components is particularly concerning for the RBA board. Minutes from the December meeting revealed uncertainty over whether the recent spike in inflation was temporary or enduring. If inflationary pressures persist, additional rate increases could be required. In November, rents rose 0.4 per cent, while the cost of new dwellings increased by 0.5 per cent, supporting fears that inflation is not entirely transitory.
Yet some economists see room for optimism. Westpac’s Justin Smirk suggested the November data could indicate that the December quarter trimmed mean is lower than the bank’s 0.8 per cent forecast, potentially keeping interest rates steady through February and beyond.
Labour market trends will also weigh heavily on the RBA’s decisions. The first employment report of the year, due January 22, will indicate whether the jobs market remains tight. The RBA has expressed concern about capacity constraints, noting the unemployment rate of 4.3 per cent is relatively low. AMP economists Diana Mousina and My Bui, however, expect unemployment to rise during 2026, based on leading labour market indicators.
Looking ahead, Mr Hauser said the RBA is prepared to respond to changing economic conditions. On the positive side, factors such as continued US monetary easing, resilient global supply chains, ongoing government stimulus, and potential productivity gains from artificial intelligence could support the economy. Conversely, geopolitical tensions in Asia or elsewhere could pose downside risks.
“The bad outcome would obviously be that some of these potential political flashpoints crystallize and become real,” Mr Hauser said.
For now, the message from the RBA is clear: while November’s inflation figures provide some relief for consumers, the bank is unlikely to ease policy soon. Borrowers should not expect any immediate reprieve on mortgages, as the central bank maintains a cautious stance on sustaining price stability.
