RBA Assistant Governor Sarah Hunter kept the door open to further tightening on Tuesday, saying at a property conference that “inflation is a top priority right now.” She added that if inflation looks likely to prove stronger than expected, “the board may well have to raise interest rates.” The remarks come after July’s stronger inflation reading drove a sharp repricing in markets, which now assign around a 70% probability to a 25bp hike to 4.60% at the September 29 meeting.
Hunter also made clear that some deterioration in demand is not necessarily an argument against further tightening. The RBA wants consumer demand to soften so that overall demand moves back into better balance with constrained supply. Previous rate increases have already slowed housing activity and pushed prices lower in most major cities. That context matters after Tuesday’s weak NAB business and Westpac consumer surveys: weaker confidence and spending intentions may represent part of the monetary transmission the RBA is deliberately seeking rather than evidence that policy has already gone too far.
At the same time, Hunter played down the risk that the RBA is engineering a hard landing, saying she did not expect a “recession or anything like that.” Her message therefore leaves the policy trade-off relatively clear. Softer demand is desirable if it helps contain inflation, and the Board appears willing to tolerate some economic cooling while pursuing that objective. The key question for the September meeting is whether incoming inflation evidence is strong enough to justify another hike, not whether consumer and business conditions have weakened.
Key Takeaways
- RBA Assistant Governor Sarah Hunter said “inflation is a top priority right now” and warned that the Board “may well have to raise interest rates” if inflation proves stronger than expected.
- Hunter made clear that softer consumer demand is part of the intended policy transmission, as the RBA tries to bring demand back into better balance with constrained supply.
- That means weak consumer sentiment and business conditions do not automatically argue against further tightening if inflation remains too strong.
- Previous rate increases have already cooled housing and pushed prices lower in most major cities, showing that restrictive policy is working through interest-sensitive parts of the economy.
- Hunter nevertheless played down hard-landing risks, saying she did not expect a “recession or anything like that.” The policy objective is therefore slower demand, not outright contraction.
- Her remarks keep another hike live without committing the RBA to move at the September meeting; incoming inflation evidence remains the key trigger.
