The Reserve Bank of Australia has held the cash rate at 3.60 per cent after inflation rose faster than expected in the September quarter.
The central bank said underlying inflation was 1 per cent for the quarter and 3 per cent over the year, up from 2.7 per cent in June. Headline inflation climbed to 3.2 per cent, driven by higher electricity costs and fuel prices. The RBA judged that some of the increase was temporary but noted there was more inflationary pressure than previously thought.
Its latest forecasts show inflation remaining above the target range until mid-2026 before easing to 2.6 per cent by 2027. Domestic demand has strengthened, supported by earlier rate cuts, with consumption and housing activity both recovering.
Labour market conditions have softened slightly, with unemployment rising to 4.5 per cent in September, but job vacancies and business surveys still indicate some tightness. The Bank said productivity growth had been weak while unit labour costs remained high.
Treasurer Jim Chalmers said the decision to keep rates unchanged “was widely anticipated and widely expected by markets.” He highlighted that inflation was “much lower than we inherited” and that the progress had allowed the RBA to cut rates three times this year.
“When we came to office, headline inflation was 6.1 per cent and rising; it’s now around half of that,” he said. “When we came to office, trimmed mean inflation was almost five per cent and rising; it’s now been within the target band for three consecutive quarters.”
Chalmers said inflation had ticked up in September across every major advanced economy except the United Kingdom. “In the face of substantial global economic uncertainty, Australians have made remarkable progress together in the economy,” he said. “We’ve managed to get inflation down while keeping unemployment low and the economy has continued to grow, with the private sector having resumed its rightful place as the key driver of growth.”
The Treasurer said that while progress was clear, people were still under pressure. “That’s why we’re continuing to roll out responsible cost-of-living relief including tax cuts for every taxpayer, slashing student debt, cheaper medicines and more bulk billing,” he said.
Chalmers said Labor’s economic plan aimed to relieve pressure on households while modernising the economy to boost productivity and resilience.
The RBA said its priority remained maintaining price stability and full employment. “The Board will be attentive to the data and the evolving assessment of the outlook and risks to guide its decisions,” it said. “Financial conditions have eased since the beginning of the year, but it will take some time to see the full effects of earlier cash rate reductions.”
The Board’s decision to hold rates steady was unanimous.
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