The Reserve Bank of Australia may need to raise interest rates as early as the first half of 2026 if growth accelerates and labour-market conditions tighten further, according to National Australia Bank chief economist Sally Auld.
Australia’s soft landing has placed the RBA in a unique position among global central banks
- economy already at full employment
- output expected to return to trend next year
Auld argues that there is little spare capacity left to absorb a renewed economic upswing. Warns that any period of above-trend expansion risks reigniting inflation through higher wages and capacity-driven price pressures.
- “no short-term fix” to the structural constraints
- improving productivity or boosting labour supply would ease capacity pressures
- but productivity growth is weak
“Any acceleration in growth and/or a tightening of the labor market from here will likely force the RBA to contemplate the need for rate hikes, possibly as soon as” the first half of 2026
