By Harry Ottley, economist at CBA:
- The RBA left the cash rate on hold at 3.60% as widely expected.The post-meeting communication was not quite as hawkish as we had expected.
- The data flow was mixed with home price rises accelerating and building approvals improving but household spending looking a touch softer than expected.
- Offshore, soft data on the US labour market was of note while the BoE left rates on hold at 4.0% in a tight decision.
- Next week in Australia there is a solid dataflow with the labour force survey and a speech from Deputy Governor Andrew Hauser in focus. We will also release our CommBank Household Spending Insights report for October.
The RBA left the cash rate on hold at 3.60% last week. The decision was widely expected, but the statement struck a slightly less hawkish tone than we expected.
Governor Michele Bullock noted that some of the strength in prices is likely temporary and reiterated that policy remains “slightly restrictive”. Updated forecasts in the November Statement on Monetary Policy show inflation peaking near 3.2% before easing towards 2.6% by late 2027, with the unemployment rate broadly steady around 4.4%.
What was clear from the communication is that the RBA is uncertain about the near-term outlook in terms of inflation and the labour market. They are firmly in data-dependant mode and are willing to wait for more data before forming a firm view on the policy outlook.
We remain comfortable with our base case that the cash rate will remain on hold through 2026.
The week’s data flow was mixed. The September MHSI was softer than expected and we estimate household consumption slowed to 0.4% in the September quarter, down from 0.9% in the June quarter. Even so, annual consumption growth of 2.4% points to a resilient backdrop, supported by tax cuts, a solid labour market, and rising housing wealth.
The housing market continues to stand out. National home prices lifted by 1.1% in October—the strongest monthly gain since mid-2023—taking annual growth to 6.1%. The increase was broad-based, led by Perth and Brisbane, while Melbourne’s rebound saw it outpace Sydney for the first time in six months.
Elsewhere, the goods trade balance widened to $3.9bn in September, underpinned by stronger gold and iron ore exports.
Offshore, the US government shutdown entered its sixth week, and markets oscillated between concern about the concentration of the recent tech rally and optimism about potential future earnings.
The Bank of England left rates unchanged at 4.0% in a close 5–4 vote, with Governor Bailey striking a cautious tone—acknowledging that inflation risks are more balanced but still too high to justify easing immediately.
Next week’s labour force survey will be the main event. After last month’s jump in the unemployment rate to 4.5%, we expect a partial unwind—around 20,000 new jobs and the unemployment rate easing to 4.4%.
The survey can be volatile, but leading indicators, including job ads and internal CBA data, still point to a resilient albeit softening labour market. A material weakening would bring rate cuts in 2026 into consideration, though that remains unlikely at this stage.
Other local releases include the NAB Business Survey, Westpac-MI Consumer Sentiment, Lending Indicators, and CBA’s Household Spending Insights for October. Together, these data will help inform views on how consumers and businesses have responded to the prospect of interest rates being on hold for some time.
RBA Deputy Governor Andrew Hauser’s speech on Monday, “On the Rails or Off to the Races?”, will also be closely watched for any additional colour on the Bank’s assessment of the risks facing the policy outlook. Given the proximity to the Statement on Monetary Policy released on Tuesday, however, it is unlikely to veer far from the party line of uncertainty and data-dependency.
Offshore, the data flow is solid. New Zealand sees a run of economic data, including card spending and migration; the UK will release labour market figures; and China’s October activity indicators—covering retail sales, industrial production, and investment—will provide a fresh read on the pace of its recovery.
