RBA deputy Andrew Hauser warns Australia's inflation outlook is 'materially worse'

SYDNEY — Australia’s inflation outlook is “materially worse” than the Reserve Bank of Australia expected in August, Deputy Governor Andrew Hauser said on Wednesday, warning that upcoming third-quarter inflation data are likely to confirm that view.

Speaking at a Citi investment conference in Sydney, Hauser said firms were passing on higher costs and that a growing number of businesses now viewed inflation of 3.0 to 3.5 per cent as the “new norm” — a development that threatens to entrench higher inflation expectations.

“The inflation outlook looks materially worse than we expected in the August… inflation has been coming in a little above expectations despite an easing in the labour market,” he said, noting cost pressures were the top concern raised by firms.

Markets now imply roughly a 40 per cent chance the RBA will lift its 4.60 per cent cash rate to 4.85 per cent at its next meeting on November 3 — up from 30 per cent at the start of the week — with a further rise fully priced by May 2027.

The comments follow four rate rises this year, with headline inflation hovering around 4 per cent and core inflation near 3.5 per cent, well above the RBA’s 2 to 3 per cent target band. Hauser said tighter policy was working, with tepid consumption growth, but admitted: “The inflation outlook has deteriorated, so that’s a pretty tricky balance.”