Updated

Updated · The Guardian · Jun 24

Australia’s Core Inflation Hits 3.6% as Economists Warn RBA May Hike Again in August

Updated

Updated · The Guardian · Jun 24

Australia’s Core Inflation Hits 3.6% as Economists Warn RBA May Hike Again in August

Q: With confidence collapsing, how high must unemployment climb to satisfy the central bank's inflation target?

The RBA’s own baseline implies unemployment needs to rise from about 4.3% now to roughly 4.7% by mid-2028 for inflation to return to target. In its May 2026 forecasts, that is the point at which the labour market has “a little spare capacity” and underlying inflation eases back to about 2.5%, the midpoint of the bank’s 2–3% goal. That means the bank is effectively saying today’s jobless rate is still too low to reliably cool price pressures. Hauser’s Phillips Curve argument points the same way: with the economy on a steeper part of the curve, a modest loosening in the labour market is meant to slow inflation without a large rise in unemployment. But collapsing business and consumer confidence raises the risk that the eventual number is higher than 4.7%. The RBA itself says that if uncertainty causes households and firms to cut spending more sharply, inflation would fall faster, but unemployment would rise more than in the baseline. It does not put a precise figure on that downside case. Outside estimates suggest the danger zone is around 5% or above if confidence deterioration turns into a broader downturn. In a severe shock scenario tied to prolonged global disruption, some forecasts see unemployment exceeding 6% in 2026. That is not the RBA’s central case, but it shows the trade-off: under normal conditions, about 4.7% may be enough; if confidence keeps collapsing, the cost in jobs could be materially higher.

2 articles · Updated · The Guardian · Jun 24

Australia’s annual headline inflation slowed to 4% in May from 4.2%, but the RBA’s trimmed-mean measure rose to 3.6% from 3.4%, keeping further rate hikes in play.
A nearly 12% drop in petrol prices drove the softer headline reading, yet underlying pressures broadened as home building costs rose 0.9% in May and food and drink inflation accelerated to 3.3%.
Markets barely shifted after the mixed report, pricing a 32% chance of an RBA hike on Aug. 11 and a 56% chance of another increase by year-end.
Economists split on the next move: NAB’s Sally Auld said weaker inflation and slowing growth could make the RBA less hawkish, while AMP’s Shane Oliver still expects a fourth hike in August.
The debate comes as the RBA has already raised rates at its first three meetings this year, arguing tighter policy can curb inflation without triggering high unemployment.