RBA Deputy Governor Hauser Says Policy Outlook Hinges on Whether Cash Rate Remains Restrictive

Reserve Bank of Australia (RBA) Deputy Governor Andrew Hauser has highlighted growing debate over whether the current 3.6% cash rate remains sufficiently restrictive to curb inflation. Speaking with Reuters in Sydney, Hauser noted that this assessment is becoming increasingly critical for the central bank’s policy outlook.

“Our best estimate is that monetary policy is still mildly restrictive,” Hauser said. “But if that judgment changes, it would have significant implications for our future stance.”

The RBA recently held interest rates steady after three cuts earlier this year, citing stronger consumer demand, rising housing prices, and persistent inflation pressures. The central bank expressed for the first time uncertainty about whether policy settings are still restrictive enough to slow the economy.

Following a higher-than-expected third-quarter inflation reading, the RBA now expects inflation to remain above its 2–3% target range until mid-2026, easing to 2.6% by then—still above the midpoint target. This outlook assumes one more rate cut next year.

Financial markets have since scaled back expectations for a May 2026 rate cut to below 70%, with economists from Commonwealth Bank of Australia and Citi suggesting the easing cycle could be over.

Recent data showing a surge in new housing loans, especially from investors, indicates that financial conditions may not be as tight as previously thought. Meanwhile, a sharp jump in consumer sentiment has raised hopes of stronger household spending, though Hauser cautioned against reading too much into what may be an “erratic” result.

When asked about potential market risks, Hauser said he does not believe an artificial intelligence-driven bubble or an imminent crash is likely, though he urged vigilance as some financial indicators remain at historical extremes.