The Reserve Bank of Australia kept interest rates at 4.35 percent at its November meeting, given the RBA board still sees the Australian economy as “running beyond its capacity,” notes Oxford Economics, with the RBA stating that “underlying inflation remains too high.”
According to comments from the RBA, “Our assessment is that demand in the economy still exceeds supply and that the labor market remains tight. Higher interest rates have been working to bring demand and supply closer towards balance, with weak growth in private domestic demand in recent quarters partly offset by strong growth in public demand.”
While the RBA sees easing in Australia’s labor market, it notes the labor market is tighter than in peer economies. “Wages growth is moderating; however, labor cost growth is still elevated alongside weak productivity growth.”
During 2026, the RBA expects output growth to increase to about its potential growth rate, the unemployment rate
