RBA Defends Rate Hikes as Job Protection Strategy
Reserve Bank of Australia (RBA) Deputy Governor Andrew Hauser made a counterintuitive argument during an interview with ABC 7.30 on 8 September 2026, stating that the RBA's interest rate hikes are aimed at protecting the jobs gained during the COVID-19 pandemic. This statement seems contradictory at first, as higher interest rates typically lead to tighter budgets and fewer jobs. However, Hauser explained that the RBA's actions are intended to safeguard the employment gains made over the past few years.
Hauser emphasized that inflation remains too high, which is the primary reason behind the RBA's rate increases. The RBA's cash rate was raised by 25 basis points to 4.60% on 29 September 2026, marking the fourth increase of the year. Governor Michele Bullock echoed Hauser's sentiments, stating that the RBA's focus is on bringing inflation back down to its target range of 2-3%. Headline inflation, as measured by the August monthly CPI indicator, stood at 4.0%, while the underlying inflation measure was about 3.5% over the past six months.
The RBA's reasoning involves a three-step logic: first, preventing inflation from becoming embedded in price-setting decisions; second, cooling demand without causing a sharp economic contraction; and third, avoiding a recession as the base scenario. Bullock noted that the unemployment rate had risen from 3.5% to 4.6% over the past couple of years, but the labour market remains relatively tight. The RBA forecasts the unemployment rate to increase to 4.8% by the end of 2028, indicating that the central bank aims to protect the bulk of the jobs gained during the pandemic rather than prevent any softening at all.
Hauser also highlighted the cost-of-living dimension, stating that the price level in the economy had risen by 10-20% higher than it should have. He predicted that inflation would return to the target range by the end of 2027. The RBA acknowledges the difficulties of rate rises, with Bullock noting that mortgage payments have increased to around 10% of household disposable income. Despite the challenges, the RBA remains committed to bringing inflation sustainably back to target, including further rate hikes if necessary.