The RBA rate outlook sharpened on October 21, 2026, as Deputy Governor Andrew Hauser warned that inflation prospects had deteriorated materially since August. BetaShares chief economist David Bassanese interpreted the remarks as strengthening the case for a November rate increase, although Hauser did not announce or commit to another hike.
Key Takeaways
- Hauser said higher oil prices, AI-related demand and domestic capacity pressures had worsened the inflation outlook.
- Bassanese expects a November increase if the forthcoming quarterly trimmed mean inflation reading reaches at least 0.9%.
- The RBA faces a choice between further restraining activity and allowing persistent inflation to become embedded in expectations.
Table of Contents
- RBA rate outlook hinges on inflation and weaker growth
- Bassanese sets out his November hike case
- Why inflation expectations complicate the decision
- Conclusion
RBA rate outlook hinges on inflation and weaker growth
In his October 21 fireside chat, Hauser said the bank was still finalising its forecasts ahead of the November policy meeting. His account of a materially worse inflation outlook pointed to mounting price pressures, not a completed interest-rate decision.
Oil prices were about one-third higher than assumed in the August projections, he said. AI-related investment and technology prices were adding demand and inflation pressure, while market services prices continued to reflect domestic capacity constraints.
The activity picture was more mixed. Hauser described an easing labour market, tepid consumption growth, weak household confidence and a housing-market correction. Stronger overseas demand and data-centre investment nevertheless provided pockets of growth.
| Item | Details |
|---|---|
| RBA August quarterly trimmed mean forecast | 0.8%, as cited by Bassanese |
| Bassanese’s threshold for a stronger hike case | A quarterly trimmed mean increase of 0.9% or more |
| Market-implied November hike probability | About 40%, as cited by Bassanese at the time |
Bassanese sets out his November hike case
Bassanese said the forthcoming quarterly trimmed mean inflation result would be central to the November decision. His base case remained another increase, conditional on a reading at or above his stated threshold.
The economist questioned whether September’s increase had already anticipated a stronger inflation result, which could give policymakers room to pause. Even so, he judged market pricing of another hike too low.
His inflation threshold and rate forecast are his own assessments, not an RBA rule or policy commitment. Likewise, his view that the bank was increasingly prepared to risk recession was an interpretation of its communications, rather than Hauser’s stated objective.
Why inflation expectations complicate the decision
Hauser said some businesses were beginning to regard inflation of 3% to 3.5% as a possible new normal. He warned that allowing expectations to drift away from the target could make inflation more costly to bring down later.
The dilemma is that additional tightening could weaken activity and employment further, while holding rates steady could allow inflation pressures to become more entrenched. Hauser said monetary policy was already working, but the deterioration in inflation made that balance harder.
He also distinguished between the initial impact of a supply shock and its subsequent effects. Interest rates cannot produce more oil or resolve a conflict, he said, but monetary policy can seek to prevent higher costs from feeding into persistent price increases and expectations.
Conclusion
The next tests are the quarterly inflation release expected the following week and the November policy meeting. They will show whether the worsening outlook prompts another increase or whether the RBA gives earlier tightening more time to work.
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