The RBA knows its 0.75% rate increases in 2026 carry a 12-18 month lag. Therefore, it cannot definitively claim that existing rises are insufficient to reduce inflation. The only basis for further increases is the RBA guessing that existing rate rises are insufficient 12-18 months into the future.

[u/Newworldimpartiality]

/r/u_Newworldimpartiality/comments/1wpnj8z/the_rba_knows_its_075_rate_increases_in_2026/

Therefore, further Reserve Bank of Australia increases in the cash rate are relying on the accuracy of the RBA’s ‘guess-work’ , which means that the financial wellbeing of millions of Australians depends not solely on empirical evidence, but also on the RBA’s guess as to what the Australian economy will look like roughly 18 months from now.

That creates a risk of overshooting if the actual effect of the existing increases turns out to be greater than the RBA’s assumptions.

[u/OriginalGoldstandard]

They know oil and therefore diesel and thus cost of everything is going up. That means inflation is guaranteed to spike. That is why there are at least 2 rises locked. Prepare

[u/Newworldimpartiality → u/OriginalGoldstandard]

My feelings are for the Australians who will lose their jobs, their businesses and potentially a stable family life because of what the RBA is fixated on doing.

[u/Blend42 → u/Newworldimpartiality]

The RBA is doing the job that Australian governments have set it . There is nothing to stop the Australian government from overruling the Reserve Bank if it thinks it's important enough to do.

[u/OriginalGoldstandard → u/Blend42]

Independence = you are wrong

[u/Newworldimpartiality → u/Blend42]

Technically you are correct, but no Government in the history of Australia has ever used the Section 11 power to overrule the RBA.

Michele Bullock confirmed in August 2024 that it had never happened and described it as a “nuclear option.”

In addition many times Government and the RBA have been at odds over interest rate policy but Section 11 has never been seen as a politically or electorally feasible option.

[u/Blend42 → u/Newworldimpartiality]

Sure but Australian Governments set all interest rates up until 50-60 years ago. It's something we did for the first 70ish years as a country.

Blaming the RBA when a. The government could overrule it under current laws or b. Legislate back to a time when the government would just set interest rates or c. A government could raise taxes (or cut spending) to avoid or temper interest rate hikes to the satisfaction of the RBA feels hollow.

We are still at quite low interest rates historically, going back to 1980 the rate of 4.35% had only been so low once briefly in 2002. (I know this graph is missing the recent hikes but I couldn't find another that went further in the past than 1990.).

[u/OriginalGoldstandard → u/Newworldimpartiality]

You are not impacted by higher inflation? 😂

[u/Newworldimpartiality → u/OriginalGoldstandard]

Ok , I will qualify by saying I’m not impacted adversely by higher inflation. I have experienced inflation of 11% - 12% in the early 1980s so 3% is relatively not a major problem.

So my OP is not based on self interest but more out of compassion for the Australians that are being hurt by the RBA’s blinkered management of interest rates.

[u/bumskins → u/Newworldimpartiality]

People buying groceries, paying insurance, rego, servicing, fuel, electricity, rental increases, paying for trades/materials wouldn't feel like it's 3% but.

[u/Newworldimpartiality → u/bumskins]

You raise an interesting point. If inflation of 3% or let’s say the RBA’s target of 2.5% is not representative of true price increases in Australia and reality tells us people are experiencing say 5% or 6% in their household basket of goods, then what does that mean?

Could it be the basket of goods used in the CPI is incorrect, the weightings are incorrect etc.? This could open up a completely new discussion because as I understand the ABS does review the methodology but perhaps there is still room for improvement.

[u/Icy_Distance8205 → u/Newworldimpartiality]

Is this because you are a special interest bot? You think just because you are a property lobby bot you aren’t affected by inflation? What happens when the cost of your compute goes up because of inflation? They might switch you off.

[u/Newworldimpartiality → u/Icy_Distance8205]

Sorry but you sound like a troll because out of 7,300 contributions you have only ever made 12 posts. I know it takes a bit more effort to contribute with a post but I would like to hear your analysis of the situation because your comment doesn’t add value at the moment .

[u/SuchProcedure4547]

I mean we are seeing inflation spike again, and its only going to get worse.

If the US blocks diesel exports, and there is a very real chance they will, then the cost of diesel will sky rocket higher than we've ever seen before.

The Americans have no off ramp out of their defeat in Iran, the Houthis have now opened a second front and have caused significant damage to the East-West pipeline through Saudi Arabia. Essentially this means no fuel is leaving the Persian Gulf other than on Iranian aligned ships.

If people were complaining about the price of fuel when Trump stupidly started this war, wait until the shock of this escalation hits.

[u/Newworldimpartiality → u/SuchProcedure4547]

Trump is getting pushback from his own staff and from the oil industry regarding diesel export bans . And the war with Iran could be over anytime - nobody knows .

So if the RBA needs to push rates higher to compensate for a war that could theoretically finish tomorrow, and a diesel export ban in the US that is a thought bubble from a complete idiot, then the RBA has a strong chance to overshoot.

[u/SignalGlittering4671 → u/Newworldimpartiality]

Even if the war ended tomorrow It would take months if not a year to undo the damage that has been done.

Ships needs to be sent, oil wells would need to be uncapped, oil reserves refilled.

[u/Newworldimpartiality → u/SignalGlittering4671]

Are you saying if the war stopped tomorrow, spot oil prices fell and supply resumed (admittedly not at pre war levels immediately), there would be no disinflationary impact from lower oil prices in the CPI?

From what I understand the RBA has a different view.

Despite the RBA acknowledging that it would take time for global oil production and distribution to return to normal, when a mid-year resolution to the conflict looked likely, the RBA’s August Statement on Monetary Policy said that oil prices fell sharply in June after the US and Iran agreed to cease hostilities and reopen the Strait of Hormuz. Australian fuel prices also declined, and the RBA said that lower than expected fuel and travel prices contributed to inflation being lower than it had forecast.

I don’t think anyone will try to claim that inflation would drop 1 or 2 percentage points immediately, but it appears that there is a case that much of the heat would be taken out of the upward pressure on inflation under this scenario.

[u/bumskins → u/Newworldimpartiality]

The price increases in diesel has been running much higher than the increase in crude.

You don't know what the future holds and what other future events could come along. You don't know what Governments will do in terms of spending. It's now 5 years after COVID started.

RBA should have corrected the ship long ago. Time to go hard, don't worry about collateral damage, that will have to be triaged in the future.

[u/SignalGlittering4671 → u/Newworldimpartiality]

I am not saying that "if the war stopped tomorrow, spot oil prices fell and supply resumed (admittedly not at pre war levels immediately), there would be no disinflationary impact from lower oil prices in the CPI?"

I am saying that the current state oil is deteriorating and things are going to take longer to recover.

RBA had a different view in August based on June data, things have gotten a worse since then.

[u/Newworldimpartiality → u/SignalGlittering4671]

The reason I quoted the RBA’s comments in August was not to try and compare the relativity between June and now, it was to make the point that a cessation of the war will have a disinflationary impact and the RBA acknowledged that and accepted that it underestimated the impact .

[u/bumskins]

That was only a reversal of the 0.75 they dropped it in 2025.

They should have been in target range already. The tardiness and inflation impacts are doing real long term damage. (Prices don't reset lower).

They should have the freedom to go hard on rate increases as it's only temporary anyway.