Australia’s central bank raised its cash rate by 25 basis points to 4.85 per cent in a six-to-three vote. The decision followed a higher inflation outlook and evidence of persistent price pressures. The bank also reported a slowing economy, falling housing prices and rising unemployment as earlier rate increases tightened financial conditions.
RBA identified higher fuel and commodity costs associated with the Middle East conflict, alongside tighter domestic capacity. Firms were passing higher costs to customers. Its revised forecast puts inflation above 3 per cent over the coming year and delays a return to the upper edge of the 2–3 per cent target until late 2027, three quarters later than previously projected.[1]
Earlier rate increases have already tightened financial conditions. The bank reported weaker economic activity, a significant fall in housing prices and higher unemployment. Its outlook anticipates higher interest rates and the housing downturn weighing on household consumption and dwelling investment. Business investment, including data centres, features more strongly in its near-term forecast, while weak productivity continues to constrain potential growth.[1]
