Key Takeaways
- Oil shock has further to run: Hunter warned that rising energy costs are spreading beyond petrol into construction materials and broader supply chains, with additional inflation pass‑through expected.
- Domestic inflation pressures persist: Demand continues to exceed Australia’s sustainable supply capacity, creating an underlying inflation challenge in addition to the external energy shock.
- Four rate hikes have not finished the job: When asked whether the RBA had done enough, Hunter replied, “Unfortunately, not quite yet.” She did not explicitly signal another rate increase.
- No recession or systemic mortgage distress evident: Despite weaker retail conditions and falling house prices, Hunter said the RBA had not identified signs of an impending recession or widespread financial distress.
- No commitment on future interest rates: Hunter declined to anticipate the Board’s next decisions, emphasizing the need to contain inflation without causing an unnecessary economic downturn.
RBA Assistant Governor for Economic Affairs Sarah Hunter warned that the inflationary effects of the Middle East oil shock have more to come, as higher energy costs are already spreading beyond fuel prices into broader supply chains. During a 60 Minutes interview broadcast on October 25, she noted that rising fuel prices are beginning to influence construction materials and other goods, with additional pass‑through expected. “We believe there is further to come, unfortunately, because it will take time for the effects to work through the system,” she said. The external shock is adding to inflation pressures that were already difficult to contain domestically.
Hunter emphasized that Australian demand continues to exceed the economy’s sustainable supply capacity, posing an inflation challenge that is separate from overseas developments. When asked whether the RBA had completed its work after four interest‑rate hikes this year, she responded, “Unfortunately, not yet.” She noted that monetary tightening is having an effect but requires additional time to materialize. “We must ensure inflation does not become entrenched,” she said, referring to the external shock. She also acknowledged that government spending adds to aggregate demand, while stressing that fiscal policy decisions belong to elected officials, not the central bank.
Despite pressure on household finances, Hunter rejected the notion that Australia was heading toward a recession, stating that the RBA had not detected such warning signs in economic data or business liaison reports. She noted weak retail conditions and declining house prices, but said there was no evidence of widespread mortgage distress. “A sharp downturn is not our baseline forecast,” she said. Hunter declined to predict future interest‑rate moves, emphasizing that the Board is committed to containing inflation while steering clear of an unnecessary recession. Her remarks underscore the RBA’s resolve to maintain inflation restraint without signaling another rate increase.
