Eye on the prize – Standard Chartered

Australia’s economy remains robust, despite a moderation in Q3 growth (0.4% q/q SA). Standard Chartered’s economists’ baseline remains for the RBA to maintain the cash rate at 3.60% at its 9 December meeting. Absent any material upside surprises to CPI inflation, we doubt rate hikes will be back on the table soon.

Little to suggest a rate hike is in the works

“Australia’s Q3 GDP growth surprised to the downside relative to our and market expectations, expanding 0.4% q/q seasonally adjusted (SA), although annual growth was at a two-year high (2.1% y/y). Slower growth in household consumption (+0.5% q/q SA) and government spending (+0.8%) offset a jump in private (+2.9%) and public investment (+3.1%). Our measure of discretionary household spending, proxied by spending on recreation, hotels and household equipment, also moderated to 0.3% q/q SA (Q2: +1.6%). Productivity growth slowed further, which should keep unit labour costs well-supported, constraining room for further Reserve Bank of Australia (RBA) easing.”

“Our baseline remains for the RBA to keep the cash rate unchanged at 3.60% in a unanimous decision at its 9 December meeting. Economic growth is steady, and the next labour market report is due for release only after the RBA meeting (11 December), with the central bank watching for any signs of softening in labour market conditions. We think the central bank will remain attentive to upside risks to inflation in 2026. Structurally, poor productivity growth has persisted, which the RBA has been unable to influence via the cash rate, increasing the non-accelerating inflation rate of unemployment (NAIRU).”

“Absent any material upside surprises to CPI inflation, we doubt rate hikes will be back on the table anytime soon. We still see an abrupt deterioration in the labour market necessitating more policy easing by the RBA in 2026 as a key risk, but that is not our baseline.”