Australia's central bank board views elevated inflation as its top priority and may need to raise interest rates further to tackle it, according to Assistant Governor Sarah Hunter. Speaking at a conference in Sydney, Hunter stated that the board has low tolerance for inflation remaining above target for an extended period, and if inflation is projected to be stronger than anticipated, the board may well have to increase interest rates. This stance comes even as the nation's property market shows signs of weakening.
Reserve Bank Governor Michele Bullock had previously noted in July 2026 that while the economy was adjusting as expected, it was still uncertain if the year's interest rate hikes would be sufficient to return inflation to target. Bullock emphasized the goal of preventing elevated cost pressures from entrenching inflation, even in a more resilient yet shock-prone global economy.
Adding to the pressure, the International Monetary Fund (IMF) has urged the Reserve Bank of Australia to remain hawkish, warning of upside risks to inflation. The IMF's 2026 Article IV mission concluding statement, released on Thursday, September 17, 2026, advised that monetary policy should stay focused on containing inflation risks and that the RBA should be prepared to hike rates as needed. This sentiment was echoed by Reuters, which reported the IMF's view that Australia might require further rate increases to tame inflation, expecting it to remain elevated before gradually cooling into the central bank's 2-3% target band in 2027.
HSBC Holdings Plc analysts, including Paul Bloxham, suggest that Australia's housing downturn could actually assist the RBA's efforts to bring inflation back to its 2-3% target. A deteriorating property market is expected to weigh on economic growth through a negative wealth effect, where a 5% fall in housing typically reduces consumer spending by 0.8% over two years. This cooling effect on the economy could potentially reduce the need for aggressive monetary tightening by the RBA.
