Australia’s gross domestic product (GDP) increased by 0.4 per cent in the third quarter, according to recent data. This figure is slightly below the market consensus of 0.7 per cent, and follows an upwardly revised 0.7 per cent growth in the previous quarter. The year-on-year economic expansion reached 2.1 per cent, compared to an upwardly revised 2 per cent for the second quarter. The consensus forecast anticipated a 2.2 per cent expansion.
The Reserve Bank of Australia (RBA) is closely monitoring the economic situation, particularly regarding inflation. The RBA is concerned about the potential for the economy to overheat, which could further escalate inflation rates that are already exceeding the central bank’s target range of 2 per cent to 3 per cent. Recent data showed that inflation accelerated to 3.8 per cent in October, surprising both the market and the central bank.
RBA Governor Michele Bullock addressed the inflation concerns, stating that persistent inflation would have implications for future monetary policy decisions. Financial markets are now pricing in a high probability of a rate hike in 2026. The central bank aims to maintain economic stability and manage inflationary pressures through its monetary policy tools.
The RBA is scheduled to meet next week for its final board meeting until February. Expectations are that the central bank will hold the cash rate steady at 3.6 per cent. The RBA is also expected to maintain a firm stance on managing inflation to ensure it returns to the target band.
