RBA Deputy Governor Andrew Hauser warned that price pressures are still “too high” and pose an ongoing challenge for the board that sets interest rates
Reserve Bank of Australia (RBA) Deputy Governor Andrew Hauser on Wednesday warned that price pressures are still “too high” and pose an ongoing challenge for the board that sets interest rates.
Speaking at an event in Sydney, Hauser said some of the recent firmness in inflation may be driven by demand picking up in an economy constrained by limited supply capacity.
“If that’s true, the risk is higher inflation may persist, and we can’t let that happen,” he said, signalling the bank’s resolve to prevent a fresh entrenchment of price pressures.
More tightening on the table
The RBA recently became the first major central bank this year to resume rate hikes, and its updated projections suggest borrowing costs may need to rise again in the coming months.
The bank now expects both headline and underlying inflation to exceed the top of its 2–3 per cent target range during the year, underscoring lingering price risks.
The next policy meeting is scheduled for mid-March. Before then, officials will assess key data releases, including January inflation and employment figures as well as fourth-quarter GDP numbers, which are likely to show the economy ended 2025 on relatively firm ground.
‘Respect the speed limit’
Hauser suggested that Australia’s renewed inflation pressures partly reflect the RBA’s earlier strategy of not raising rates too aggressively in the post-pandemic period, in a bid to steer the economy towards a soft landing.
That approach, he said, has left the economy closer to equilibrium than some international peers. But it also means that any resurgence in activity—such as that seen late last year—can more quickly feed into higher prices.
The RBA has revised down its estimate of the economy’s potential growth rate to around 2 per cent, citing persistently weak productivity gains.
“We have to respect the speed limit of the economy,” Hauser said, cautioning that attempting to run the economy “hotter than it can run” would only reignite inflation and ultimately damage productivity.
“And that’s our contribution to the productivity game,” he added.
Demand still resilient
Recent indicators present a mixed picture. Consumer confidence eased in February following the latest rate increase, while a business survey showed conditions softening and confidence remaining below long-term averages.
Household spending growth also slipped in December after a period of stronger gains, suggesting higher interest rates are beginning to temper demand.
At the same time, debate has intensified over the role of fiscal policy. Government spending as a share of GDP has remained elevated in recent years, prompting some critics to argue that public outlays may be complicating the inflation fight.
“I was brought up to learn if you are supposed to be targeting something that’s 2-1/2 and inflation is actually 3.4, you probably should get back to your day job and that’s what we’ll do,” he said, reiterating the bank’s focus on returning inflation to target.
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