Australia raises interest rate again
The Reserve Bank of Australia (RBA) revealed its latest cash rate decision after concluding its November policy discussions. After implementing another 25-basis-point increase, the benchmark rate now stands at 4.85 per cent, marking the fifth consecutive rise this year and reaching its peak since 2004.
According to the RBA’s official statement, recent economic indicators confirm that underlying inflation remains widespread. The central bank observed that supply constraints are tighter than earlier projections, while rising fuel costs are spreading to broader price increases. Officials now anticipate inflation staying above 3 per cent over the next 12 months, citing growing concerns about persistent price pressures becoming entrenched. The board emphasized that prolonged raised inflation justifies further monetary tightening to restore price stability.
Decision and Reaction
The rate hike was approved by a majority vote, with six board members supporting the 25-basis-point increase to 4.85 per cent, while three members advocated maintaining the previous rate of 4.60 per cent. Prior to the announcement on 2 November, financial markets, as tracked by the ASX’s RBA Rate Tracker, assigned an 80 per cent probability to another increase and only a 20 per cent chance of rates remaining unchanged.
Financial analysts had previously expressed concerns that inflationary pressures were proving difficult to control, despite signs of slowing economic expansion and cooling in the housing sector. Philip Brown, research director at FIIG Securities, noted that the RBA’s recent communications have prioritized addressing future inflation expectations over near-term price movements.
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He stated, “The recent RBA communications have been talking [about] inflation expectations and price-setting behaviour in the future much more than recent inflation outcomes. The RBA is very likely to raise rates and the Statement on Monetary Policy forecasts will be very important.” Brown cautioned that sustained rate increases could deepen economic challenges, whereas Ivan Colhoun, chief economist at CreditorWatch, predicted the RBA would pause in December to evaluate the impact of past tightening measures. Colhoun suggested the central bank might maintain current rates through December and possibly into early 2024.
Economic Impact
Paul Bloxham, HSBC’s chief economist, argued that the latest hike could deepen the economic slowdown, given weak productivity growth and higher-than-expected government spending constraints. The Australian Council of Trade Unions (ACTU) strongly criticized the decision, arguing that workers already face significant financial strain from rising living and housing expenses. ACTU Secretary Melissa Donnelly warned that adopting a strategy similar to New Zealand’s could push unemployment up by an additional 145,000 Australians. She stated, “Lifting official interest rates and ignoring the risk to jobs doesn’t fix global inflation. But it costs jobs and Australian workers don’t deserve to be forced down that path.”
The RBA’s move follows September’s consumer price index (CPI) report, which showed annual inflation rising to 4.3 per cent—up from 4.0 per cent in August—and a quarterly trimmed mean inflation rate of 1.0 per cent. Before the decision, Russel Chesler of VanEck had advised that market expectations might be running ahead, suggesting the RBA could defer further increases until December.
