RBA deputy warns Australia inflation outlook is "materially worse", reopening November rate hike debate

Reserve Bank of Australia Deputy Governor Andrew Hauser told investors on October 21, 2026 that the bank's view of inflation had worsened since its August forecasts, a warning that has pushed markets to reprice the odds of another cash rate increase at the RBA meeting scheduled for early November.

What Hauser said and why markets moved

Speaking at a Citi Australia and New Zealand investment conference in Sydney, Hauser said the RBA's economists were still finalising their quarterly forecasts but that the inflation outlook “looked materially worse” than expected in August. He flagged that higher oil and other input costs were feeding through into company pricing and that some businesses appeared to be passing those costs to consumers, a development that risks embedding stronger inflation expectations.

Investors reacted quickly. Futures and options markets increased the probability they assign to a further 25 basis point rise in the cash rate at the November meeting, after having largely discounted another hike just days earlier. Currency markets also shifted, with the Australian dollar trading firmer amid expectations of tighter policy relative to other developed economies.

Policy trade offs and the RBA calendar

The RBA last raised the cash rate three weeks earlier, bringing the cash rate to 4.60 percent after a series of increases across 2026. Hauser emphasised that while tighter policy is working to slow demand and the labour market has shown signs of easing, the additional upward pressure from energy and some imported costs complicates the bank's task of returning inflation to the 2 to 3 percent target band.

The RBA board will meet on November 3 to decide whether to lift the cash rate again. Hauser’s comments mean the board will consider fresh data, including the Australian Bureau of Statistics consumer price index for the third quarter, and updated business liaison evidence when weighing the trade off between higher short term pain for households and the long term goal of disinflation.

Immediate economic and market implications

A possible November increase would have immediate consequences across credit markets and household finances. Mortgage rates in Australia are already elevated after the year of tightening, and another hike would raise debt servicing costs for floating rate borrowers and newly refixing mortgages. That in turn could restrain consumer spending, which the RBA has been watching closely as a channel for disinflation.

For businesses, Hauser’s observations about cost pass through are a signal to revisit pricing strategies and wage offers. Firms that have been absorbing cost rises to protect market share may face pressure to lift prices, which could prolong elevated inflation if wage outcomes also drift higher.

External drivers and the role of commodity markets

Hauser singled out oil as a notable source of upside risk to inflation. Brent crude traded notably higher than the level the RBA used in its August projections, and higher fuel costs can lift transport and many other consumer facing prices. Australia’s exposure to global commodity cycles complicates the domestic policy response, because monetary policy cannot directly offset imported price shocks but can act to prevent those shocks from translating into entrenched inflation expectations.

At the same time, higher rates can influence the Australian dollar and commodity price linkages, creating feedback loops that the bank must consider. A stronger Aussie reduces the cost of imported goods, while a weaker currency can amplify imported inflation.

Why this matters to households and investors

For households, the central bank’s stance matters for the affordability of mortgages and the outlook for rents and consumer prices. Even if the RBA decides to pause in November, Hauser’s warning increases the chance that policy will need to stay restrictive for longer than markets previously anticipated.

For investors, an elevated probability of a November hike shifts asset allocation decisions. Fixed income investors will price higher yields into Australian government and bank securities, while equity investors will reassess sectors most sensitive to rates and consumer demand, such as housing related stocks and discretionary retailers.

What to watch next

Market participants will now watch the quarterly CPI release for the third quarter, due before the November meeting, and other high frequency indicators of wages, retail spending and business costs. The RBA’s own business liaison reports and any commentary from other board members will also be closely scrutinised for signals about whether Hauser’s view is shared across the board.

Hauser’s remarks on October 21 sharpen the policy debate in Australia by underlining that the path to sustained disinflation remains uncertain. That uncertainty will keep financial markets and households attentive to incoming data and the RBA’s November decision.