RBA Says No Near-Term Recession Risk Amid Rising Unemployment and Inflation
During a Senate estimates hearing, the Reserve Bank of Australia said current data do not indicate a recession in the next six months, while noting that inflation remains above target.
The Reserve Bank of Australia (RBA) told a Senate economics committee that it sees no risk of a recession in the near term, despite a rise in unemployment and persistent inflation pressures. Unemployment has climbed from 4.1% at the start of 2026 to 4.7% in September, according to the latest labour statistics.
"We are monitoring a very wide range of indicators across the real economy. At the moment none of those indicators are suggesting that the economy is in or is heading into a recession in the near term," RBA chief economist Sarah Hunter said.
Senator Nick McKim asked about global supply shocks and the suitability of interest-rate policy for curbing inflation. RBA governor Michele Bullock responded that both supply and demand factors are influencing price growth and that monetary policy must keep demand and supply aligned.
"Yes, we have had supply shocks but we have a demand component to Australia’s inflation rate. We are actually responding to a demand component and that has to be extremely clear here. The second thing is that we need to make sure that we keep demand and supply well aligned and monetary policy is fit for purpose in that," Bullock said.
Australian Bureau of Statistics data showed headline inflation at 4.3% year-to-date to September, up from 4.0% in August, while the trimmed-mean measure rose to 3.6% from 3.5%.
"What we have evidence on is inflation and the evidence there is it is far too high," Bullock added, warning that further policy action may be needed.
RBA deputy governor Andrew Hauser said the latest figures were broadly in line with market expectations and the bank’s own forecasts, but emphasized that high inflation remains a key risk.
"These are too high, we’ve said this repeatedly and I’m sure we will say that again today," Hauser told the committee.
The RBA’s inflation target range is 2%-3% annually. To date this year, the central bank has raised the cash rate four times, totaling a 100-basis-point increase, in an effort to bring inflation back within target.