Beware the inflation head fake

Before Tuesday’s interest rate decision, financial markets anticipated that the Reserve Bank of Australia (RBA) would deliver one more 25-bp rate hike in 2026 amid rising inflation concerns.

Tuesday’s NAB Business Survey for November suggested that Australia’s inflation is not as broad-based as thought and also pointed to a further softening of the labour market—both of which should comfort the RBA.

As illustrated below by Shane Oliver from AMP, both business confidence and conditions softened in November as rate cut hopes evaporated:

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About the author

Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.