RBA Assistant Governor Sarah Hunter’s fireside chat in Canberra on Monday reinforced the increasingly hawkish tone from senior officials, following similarly firm commentary from Deputy Governor Andrew Hauser last week. While Hunter acknowledged a mixed domestic backdrop, including a weakening housing market and some easing in labour-market conditions, she emphasised that household spending and business investment remain resilient relative to the economy’s constrained supply capacity.
Underlying inflation remains above the RBA’s 2–3 per cent target band, while the renewed escalation of the Iran conflict has pushed Brent crude back above US$108 per barrel. Hunter noted that recent price increases were already flowing through to the local economy, highlighting the risk that a prolonged energy shock feeds beyond petrol into transport, shipping and broader business input costs.
These risks come against a backdrop of stronger-than-expected domestic demand. Hunter pointed to resilient household spending and rising business investment, including substantial investment in data centres and AI. With productive capacity expanding slowly, stronger demand is more likely to put upward pressure on prices when the economy is operating close to its supply limits.
Financial markets have responded accordingly, with money markets pricing close to an 80 per cent probability of a fourth rate increase at the September meeting. Markets have fully priced in a further increase to 4.85 per cent by March, while now pricing the cash rate at around 5 per cent by mid-2027. Economists remain divided on whether rates ultimately need to rise above 5 per cent, highlighting uncertainty about the duration and magnitude of the inflation shock.
For the broader economic outlook, the recent commentary points to an increasing risk of higher-for-longer interest rates. While the weakening housing market and softer consumption provide important offsets, the RBA’s recent messaging suggests it is increasingly focused on preventing current inflationary pressures from becoming entrenched, at the cost of weaker economic activity.
Source: Sarah Hunter, Fireside Chat at the Regional Australia Institute’s Regions Rising National Summit, September 2026.