Governor Michele Bullock has signaled that a series of interest rate hikes is starting to stabilize the Australian economy, even as inflationary risks continue to loom over the market.
The Reserve Bank of Australia (RBA) has raised interest rates at each of its three meetings this year to a record 4.35 percent. Governor Michele Bullock stressed that this action is crucial to slowing the rise in commodity prices that has surged since the second half of 2025.
The central bank has expressed concern about the impact of the inflationary chain resulting from the energy price shock caused by the conflict in the Middle East. Rising global oil and commodity prices are expected to continue to put pressure on the cost of living of the people despite the tightening of monetary policy.
An early sign that the RBA's measures are starting to work can be seen in the housing market, which is now easing. Tighter lending conditions resulting from the new monetary policy have begun to have a rapid impact on property activity in the country.
The Australian economy showed signs of slowing as household spending fell by 1.1 percent in April. The combination of high inflation and rising borrowing costs has forced consumers to be more cautious about spending to survive.
The impact of rising interest rates has also spread to the employment sector, with the unemployment rate unexpectedly rising to a four-year high. The RBA expects economic growth to continue to decline until inflation returns to its 2.5 percent target by the end of 2028.
Investors are now expecting the RBA to keep interest rates on hold at its June meeting before reassessing the need for another hike in August. Michele Bullock warned that if inflation remains stubborn, higher interest rates may be needed for a longer period.
