RBA Recap

• The RBA left rates unchanged at 3.60%, yet a firmer inflation pulse, resilient housing and a still-tight labour market have clearly unsettled what once looked like a smooth path to lower rates.
• Inflation has re-accelerated and private demand is recovering, while labour market conditions are only gradually easing, forcing the RBA to reassess just how restrictive policy really is.
• Rate cuts weren’t even discussed in December, markets are increasingly divided, and the February meeting looms as a potential inflection point if inflation proves more persistent than hoped.

The Australian Economy

• Between November and December, successive inflation, labour and demand data quietly but decisively shifted the RBA from measured confidence to emerging caution, even as rates stayed on hold at 3.60%.
• Inflation broadened, wages stayed firm and the labour market remained tighter than ideal, challenging the idea that price pressures would fade without further policy restraint.
• Stronger household spending, housing finance and investment momentum narrowed the margin for error, leaving the RBA increasingly focused on upside inflation risks as February looms.

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