The Reserve Bank has closed out the year with a steady cash rate of 3.6 per cent, keeping interest rates unchanged for a fourth consecutive meeting while it gauges whether recent inflation pressures will linger into 2026.
Inflation has come down sharply from its 2022 peak, yet the bank noted that underlying prices have edged up in recent months. It suggested some of the rise may reflect temporary factors in the new monthly CPI series, though it acknowledged signs of a broader lift in prices that could take time to assess.
Private demand is strengthening, supported by both consumption and investment. Housing activity continues to pick up and credit remains accessible. Earlier rate cuts have not flowed through entirely, yet money market rates and government bond yields have risen, offering a reminder that conditions can turn quickly.
Labour market indicators show a gradual softening, although many employers still report difficulties finding staff. Wage growth has eased from its peak, but broader measures remain strong and unit labour costs are high.
The Board said the risks around inflation have tilted to the upside, but it wants more data before making any move. It will watch global conditions, domestic spending and the path for inflation and jobs closely.
Economist Stephen Koukoulas said there was little surprise in today’s decision. “Good day taxpayers. Uh the RBA left rates on hold. No surprises.” He described the statement as brief but closely watched. “It was one of the most anticipated commentaries on the economy. Inflation has picked up. Of course it has. But they’re not sure whether there’s anything meaningful in it, whether it’s a series of uh administered prices, one-off price increases, in other words.”
Koukoulas said the broader story was still forming. “We need a little bit more information be before we’re sure or before the RBA is sure about that.” He noted that private demand had improved, though not strongly enough to shift the bank’s stance. “They still reckon the labor market’s tight. Well, obviously the the proof of that will be in uh upcoming uh jobs reports.” He added that “it looks to be one of the shortest statements uh from the RBA,” interrupted briefly by a familiar cameo. “Uh so, and here’s my cat just walking past again. Hello, Zoe.” His view was that monetary policy would remain steady for a while yet. “They will they will wait for the um the data to come through over the summertime break and into the new year.”
Treasurer Jim Chalmers said the decision was expected. “Today the independent Reserve Bank of Australia Monetary Policy Board kept interest rates on hold at 3.60 per cent as expected.”
He added that households would have preferred faster relief, but the broader progress cannot be ignored. “While millions of Australians would have preferred more rate relief, this decision was widely anticipated by economists and markets.” He emphasised that “inflation has moderated substantially since we came to office and that has given the Reserve Bank the confidence to cut interest rates three times this year.”
Those cuts, he said, have brought meaningful support. “Those three rate cuts have provided very welcome relief to millions of families this year, saving a household with a 700,000 dollar mortgage around 330 dollars a month, or 4,000 dollars a year.”
Chalmers argued the country is in a stronger position than it was in 2022. “When we came to office headline inflation was 6.1 per cent and rising, but it’s now much lower than that.” While inflation has lifted recently, he said this reflects global trends as well as temporary factors. “Our economic strategy has brought inflation down substantially from its peak while keeping our economy growing and keeping unemployment low.”
He pointed to renewed private sector momentum. “The private sector has resumed its rightful place as the key driver of growth, powered by the strongest growth in private investment in almost five years.” He added that the RBA statement reflected this shift. “The RBA has acknowledged this in their decision today, noting that private sector growth and investment are both strengthening.”
The Treasurer highlighted the role of job creation since 2022. “Of the 1.2 million new jobs created since Labor came to office, more than four out of five of them have been in the private sector.” He said productivity is moving in the right direction. “Although we know quarterly movements can be volatile, productivity has lifted for four consecutive quarters and in the market sector annual growth is above 1 per cent.”
He also pointed to the government’s fiscal stance. “At the same time, our Government has taken a responsible approach to fiscal management, paying down debt, reducing the interest on that debt, banking revenue upgrades, and finding 100 billion dollars in savings.”
Even with this progress, Chalmers said households remain under strain. “Despite all this progress, we know there is still more work to do and people are still under pressure, which is 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 framed the path ahead as long term. “Labor’s economic plan is all about helping with the cost of living at the same time as we modernise Australia’s economy to boost living standards, drive increased productivity, and make our budget more sustainable.”
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