FX.co ★ Inflation Risks Keep RBA Cautious on Policy Easing: Deputy Governor Hauser

Australia's monetary policy is navigating a challenging period as the nation's economic recovery kicks off with demand already outpacing potential output, allowing minimal room for immediate easing. In a recent speech, Reserve Bank Deputy Governor Andrew Hauser highlighted that demand was "slightly" above potential when GDP growth surged last year, marking the most restrictive recovery since the early 1980s. This situation indicates limited ability to expand without triggering inflation. Hauser stated, "Achieving inflation targets is still feasible, but it necessitates maintaining a restrictive policy to continue narrowing the gap." The central bank held interest rates steady at 3.6% last week, amid strong consumer demand and a resurgence in the housing market, indicating a cautious stance following three rate cuts earlier this year. With inflation expected to remain above the 2–3% target range until at least mid-2026 due to ongoing capacity constraints, Hauser emphasized the importance of enhancing productivity and investment, warning that failing to do so could leave the economy constrained.