The Reserve Bank of Australia (RBA) has left the cash rate unchanged at 3.6%, in line with market expectations, as policymakers weighed a mix of rising domestic demand, sticky inflation, and heightened global uncertainty.
At its September meeting, the central bank said inflation had eased considerably but warned it may still surprise on the upside.
"Both headline and trimmed mean inflation were within the 2–3 per cent range in the June quarter. Recent data, while partial and volatile, suggest that inflation in the September quarter may be higher than expected at the time of the August Statement on Monetary Policy," the minutes stated.
The decision came after fresh consumer price figures showed headline inflation accelerating to 3% in August, its highest level since July 2024, driven by housing, food, and alcohol costs.
Policymakers also pointed to stronger private demand as a key driver of economic momentum: "Data for the June quarter show that private demand is recovering a little more rapidly than expected, taking over from public demand as the driver of growth. In particular, private consumption is picking up as real household incomes rise and measures of financial conditions ease.
"The housing market is strengthening, a sign that recent interest rate decreases are having an effect. Credit is readily available to both households and businesses," the RBA said.
On the domestic outlook, the central bank highlighted a dual risk scenario. "On the domestic side, stronger-than-expected data on growth and inflation may indicate that households have become more comfortable consuming as real incomes and wealth rise.
"If this continues, it may make it easier for businesses to pass on cost increases and lead to more demand for labour.
"Alternatively, the recent growth in consumption might not persist, particularly if households become more concerned about overseas developments."
The RBA also underlined the fragile global environment, citing trade tensions and rising geopolitical risks. The board noted that although there is “a little more clarity” on the scope and scale of U.S. tariffs, trade policy developments still expected to have an “adverse effect on global economic growth over time”.
