RBA inflation outlook worse, Hauser says; November hike undecided

Key takeaways

• Reserve Bank of Australia (RBA) Deputy Governor Andrew Hauser said on 21 October 2026 that the inflation outlook looks "materially worse" than the bank projected in its August forecasts.
• He did not say what the Monetary Policy Board will decide in November, noting that staff were "still finalising" the new quarterly forecasts.
• Higher oil prices are a central factor: Hauser said oil is about a third above the level assumed in the August projections.
• Market pricing for a 25 basis point rise to 4.85% at the 2–3 November meeting jumped to roughly 50%, according to Reuters and Bloomberg data cited by ABC News.
• The next major input is the September CPI release from the Australian Bureau of Statistics, due next week, ahead of the Board's decision and new Statement on Monetary Policy on 3 November.

What Hauser said

The RBA inflation outlook looks "materially worse" than the bank projected in August, Deputy Governor Andrew Hauser said on 21 October, but he did not say what the Monetary Policy Board will decide in November, as staff are "still finalising" new forecasts.

His central message was that the inflation picture has deteriorated since the bank last published forecasts. "The inflation outlook looks materially worse than we projected in the August report," he said, according to the RBA transcript. He linked that judgement to three upside risks the bank had flagged earlier in the year, which he said had now largely materialised: a prolonged crisis in the Middle East, strong demand linked to artificial intelligence, and weaker supply capacity at home.

On energy, Hauser said oil prices were about a third higher than the bank assumed in August, and that the pass-through of those increases into consumer prices had barely begun. Reuters reported that Brent crude was trading above US$110 a barrel at the time, compared with about US$102 when the Board last met three weeks earlier.

Crucially for markets, Hauser did not pre-announce a decision. He said the bank was still finalising its forecasts roughly a week and a half before the meeting, and Reuters reported that he was unsure whether rates would need to rise again next month. He described the Board's position as a choice between doing more to contain inflation and holding back to limit damage to the labour market, calling it a world of "hard choices", according to Reuters.

Inflation expectations

Hauser gave particular weight to inflation expectations. He pointed to the RBA's own business liaison and survey work, which suggests some firms now regard inflation of 3 to 3.5 per cent as normal, above the bank's 2–3 per cent target range. "We can't allow expectations to shift away from the target," he said, according to the RBA transcript. ABC News reported that he described expectations drifting from target as "central banker's nightmare" territory.

He also argued that monetary policy cannot directly offset a supply shock such as higher oil prices, but must prevent that shock from feeding into wider price-setting and wage behaviour. ABC News reported him saying the bank was accepting some shorter-term pain to avoid a longer and worse outcome.

The labour market

The remarks came days after data showed the unemployment rate rose to 4.7 per cent in September, which Reuters and ABC described as a five-year high. Hauser said the figure was a little weaker than expected and that changes to the Australian Bureau of Statistics labour force survey meant there could be "some noise in that number". He added that the labour market was easing but that Australia's jobless rate remains low compared with other G20 economies.

How it fits the RBA's latest statement

At its 29 September meeting, the RBA's Monetary Policy Board unanimously raised the cash rate target by 25 basis points to 4.60 per cent. The statement said inflation was "still too high", that recent outcomes had been stronger than expected and that short-term inflation expectations remained elevated. It cited higher fuel prices flowing into other goods and services, as well as capacity pressures, and noted that global energy prices were well above the assumptions used in August.

The September statement also said the Board would do what is necessary to return inflation sustainably to target, "including increasing the cash rate target further if needed." It described the risks as two-sided in an uncomfortable way: inflation could turn out higher and activity weaker than forecast. Hauser's comments on Wednesday suggest the inflation side of that balance has moved further in the wrong direction, while the labour market has softened somewhat faster.

Hauser also disclosed one technical change behind the new forecasts: the bank has lowered its assumption for underlying non-farm productivity growth from 1 per cent to 0.7 per cent a year. Lower assumed productivity implies less room for the economy to grow without adding to inflation.

The data on the table

Market-implied probabilities change quickly and are derived from overnight index swap pricing; they are not forecasts by the RBA. Reuters reported the probability had been about 30% at the start of the week, while ABC News said it had dropped below 20% the previous week after the weak jobs data.

What the November meeting will weigh

The Board meets on 2–3 November, with the decision announced on 3 November alongside the November Statement on Monetary Policy, which contains the bank's updated quarterly forecasts. Several inputs will matter:

• September CPI data. The Australian Bureau of Statistics is scheduled to publish September inflation figures next week, on 28 October, including the September-quarter trimmed mean that the RBA watches closely. Hauser said the quarterly trimmed mean was likely to come in above the August assumption. Reuters reported that headline inflation could reach about 4.0% for the quarter, with core inflation expected around 3.5%.
• The new forecasts. Revised assumptions on oil prices and productivity will feed directly into the inflation and growth projections the Board sees.
• The labour market. A rise in unemployment to 4.7% points to a softening economy, which argues for caution; the Board must judge how much of that is signal and how much is survey noise.
• Housing and household spending. The September statement noted that housing prices had fallen in most capital cities and that new housing lending had declined noticeably. Reuters reported that house prices have fallen faster than policymakers expected.
• Expectations. Evidence that businesses and households are anchoring on higher inflation would weigh heavily, given Hauser's emphasis on it.

Private-sector economists are split. Reuters reported that Goldman Sachs now views a November rise as more likely than not unless the quarterly CPI surprises on the downside. ABC News reported that UBS chief economist George Tharenou called the remarks hawkish and forecasts a November hike, and that he raised the possibility of a split vote on the Board.

Other central banks in the region are facing similar trade-offs. Bank Indonesia held its BI-Rate at 5.75% on 21 October against expectations of a hike, while raising its deposit facility rate to support the rupiah. In the United States, jobless claims fell to 194,000, a sign that layoffs remain rare even as hiring slows.

What it means

Hauser's comments do not commit the RBA to anything, and he was explicit that the forecasts are not finished. What they do is move the bank's public framing: the question is no longer only whether a weakening labour market argues for a pause, but whether a worse inflation outlook, driven by energy and capacity constraints, makes a pause risky for expectations.

For households, the practical implication is continued uncertainty over borrowing costs in the near term. For markets, the repricing on Wednesday shows how sensitive expectations are to official commentary when the data are finely balanced. The September CPI release next week is likely to be the single most important data point before the Board meets. What remains unknown is how the Board weighs a rising jobless rate against inflation that the bank itself now expects to run higher than it forecast in August.

Australia is not alone in facing an energy-driven inflation problem; central banks elsewhere are weighing similar trade-offs as oil prices stay elevated. But the RBA's decision on 3 November will be one of the clearer tests of how a central bank responds when supply-driven inflation and a softening job market arrive together.

Related coverage

• Why the Fed Is Weighing Another Rate Hike Before Its Oct. 28 Decision
• UK inflation rises to 3.5% in September as fuel costs climb
• Forex brief: dollar steadies near 101.7 as yen and euro stay weak
• KOSPI slips about 1% after rebound; Bank of Korea holds at 3%

Sources

• Reserve Bank of Australia: Fireside chat by Andrew Hauser, Deputy Governor, at Citi's Australia & New Zealand Investment Conference (21 October 2026)
• Reserve Bank of Australia: Statement by the Monetary Policy Board, Monetary Policy Decision (29 September 2026)
• Australian Bureau of Statistics: CPI rose 4.0% in the year to August 2026
• Australian Bureau of Statistics: Consumer Price Index, Australia, August 2026
• Reuters (via AOL): Australian central banker says inflation outlook worse, unsure about November rate hike
• ABC News: RBA deputy warns inflation outlook 'materially worse' ahead of November meeting
• Investing.com: RBA November rate hike bets surge to over 50% after Hauser warning on inflation

This article is for information only and is not investment advice.