Australia Interest Rate

Australia’s monetary policy faces a tricky phase as the economy’s recovery began with demand already exceeding potential output, leaving little room for near-term easing, the Reserve Bank Deputy Governor Andrew Hauser said in a speech on Monday. He noted demand was “slightly” above potential when GDP growth picked up last year, the tightest recovery since the early 1980s, meaning limited scope to expand without stoking inflation. “That can still be consistent with bringing inflation back to target... but achieving that goal will require policy to be restrictive enough to keep shrinking the gap,” Hauser said. The central bank kept rates at 3.6% last week amid firm consumer demand and a housing rebound, signaling caution after three cuts this year. Inflation is seen above the 2–3% target until at least mid-2026 as capacity constraints persist. Hauser urged boosting productivity and investment, warning that without it, “we may find ourselves boxed in on the rail.”