Reserve Bank of Australia (RBA) Deputy Governor Andrew Hauser has indicated that inflation risks have increased materially since the bank’s August forecast, raising the possibility of another interest rate hike at the November policy meeting scheduled for Melbourne Cup Day. Speaking at the Citi Investment Conference in Sydney, Hauser cited higher oil prices, persistent inflationary pressures, and weakening confidence in Australia’s ability to return inflation to the 2 to 3 percent target band as key concerns shaping the RBA’s outlook.

Hauser emphasized that inflation has been driven partly by domestic capacity constraints and ongoing cost pressures in the business sector, despite signs of some easing in the labour market. He also noted an acceleration in prices linked to technological advances, including a boom in data centre construction and rising costs related to artificial intelligence. The deputy governor acknowledged that recent increases in unemployment may contain “noise,” stressing that the labour market remains relatively tight compared to other major economies.

Hauser’s comments prompted a notable shift in markets, with the probability of a November rate hike rising sharply to about 52 percent, more than double previous estimates. Following his remarks, economists at several financial institutions, including Goldman Sachs, Betashares, ANZ, Westpac, UBS, HSBC, Morgan Financial, and S&P, have revised their forecasts to include a likely rate increase next month. Goldman Sachs chief economist Andrew Boak described Hauser’s tone as “clearly hawkish,” highlighting the risks posed by higher oil prices and persistent inflation expectations among businesses.

Some economists expressed concerns about the potential economic impact of further tightening. Commonwealth Bank chief economist Luke Yeaman cautioned that an additional rate rise could risk pushing the economy “over the edge,” suggesting the RBA’s tightening efforts may already be largely complete. Meanwhile, others highlighted that the central bank appears increasingly willing to accept the possibility of a recession to rein in inflation, which has remained above target for an extended period.

Hauser also addressed broader structural challenges facing the Australian economy, such as low productivity growth, revised downward to 0.7 percent for the year to August after hovering near zero for the past decade. He linked this sluggish productivity to a slower potential growth rate, meaning the economy cannot expand as quickly without generating inflationary pressure. This dynamic, combined with sustained inflation and rising business inflation expectations, complicates the RBA’s task in balancing growth and price stability.

Absent a softer-than-expected inflation reading for the September quarter, most forecasters now anticipate the RBA will raise the cash rate by 25 basis points to 4.85 percent, the highest level since 2008. The central bank may then maintain this peak rate into mid-2027 before beginning a gradual easing cycle. The next inflation figures, due ahead of the November meeting, will therefore be closely watched to gauge whether the RBA’s tightening cycle will continue or pause.