Australia’s rates debate is pulling in one direction—hold at 3.60%—but for very different reasons, and with very different risks.
David Bassanese at BetaShares sees room for cuts next year, but only if the “now” of inflation cooperates. The RBA’s forecasts show trimmed-mean inflation nudging back above the 2–3% band over the December and March quarters—seemingly inconsistent with easing. Even so, he gives more weight to monthly and quarterly annualised prints as timelier signals of momentum. If those measures drift lower, cuts follow; if they don’t, the easing cycle could be brief—or, in a tail risk, give way to a surprise hike. He didn’t see a hike signal this time, but he says that risk is no longer negligible.
Josh Williamson at Citi reaches the opposite conclusion. He concedes the MPB’s statement wasn’t overtly hawkish, but argues the November SMP and its projections were. A still-tight labour market, accelerating house prices feeding through to inflation, and ongoing supply constraints all point to stubborn near-term price pressure. On that view, the RBA’s cutting cycle is over; the cash rate sits at 3.60% through 2026.
Moody’s Analytics, via Sunny Kim Nguyen, focuses on a tougher structural read. The September quarter overshot the RBA’s expectations, forcing officials to pencil in core inflation rising above 3% before it improves. Headline indicators suggest a loosening labour market, but underutilisation remains low, vacancies high, and firms report hiring difficulty. With poor productivity keeping unit labour costs elevated, inflation persists. Housing adds fuel—rising prices and construction costs—with earlier easing feeding back into demand. Most striking is the RBA’s uncertainty over whether policy is even “a little restrictive.” With the estimated neutral rate drifting toward—or even above—the current cash rate, the stance may be less tight than assumed. The staff forecast shows a technical cut in 2026, but only if realised disinflation materialises. December and February are effectively off the table.
State Street leans hawkish. Dwyfor Evans notes the RBA has shifted from two implied cuts in 2026 (in August) to one, aligning more closely with OIS pricing. Wage growth is easing, but their PriceStats series still points to above-target pressures—supportive for AUD, marginally negative for bonds. Krishna Bhimavarapu cautions that while rebates and annual reviews flattered Q3 CPI, labour-market risks may be underappreciated; unemployment could hover near 4.5% for longer. Base case: a prolonged hold at 3.60%, unless labour weakness arrives sooner than expected.
The base case is a hold: the RBA won’t cut until inflation is clearly falling in real data and the labour market cools. If near-term inflation momentum eases convincingly, cuts begin; if not, they wait.