But is it enough to satisfy the RBA hawks?
The latest gross domestic product (GDP) data print can be read in an optimistic light by the market voices that have raised the prospect of an interest rate hike in 2026.
The Australian economy grew by 0.4% on a quarter-on-quarter basis in the three months ending September 30, a fair shot below the concerningly high 0.7% print seen in the second quarter.
While GDP growth on a year-on-year basis was actually higher this quarter (2.1% compared to 1.8% in the second quarter), today’s result nonetheless came in softer than was anticipated.
The print may provide some relief for economists that have suggested that, despite holding in September, the Reserve Bank of Australia (RBA) cut rates too fast and too soon in 2025 amid three 25-basis-point cuts to 3.6% this year.
Commonwealth Bank chief economist Luke Yeaman said what everyone was thinking last week, when he suggested the country’s economy has been running uncomfortably close to its “speed limit”, thanks to stronger-than-expected inflation, resilient employment market and a sharp lift in housing prices.
Yeaman suggested rate hikes in 2026 would “come onto the table” if the data didn’t get back in line.
Just yesterday, ANZ became the latest banking major to rule out any near-term interest rate cuts from the RBA “given recent inflation pressures”, per a research from ANZ head of Australian economics Adam Boyton.
“ANZ has joined a growing cohort of economists who now believe we’ve hit the bottom of the cash rate cycle,” noted Sally Tindall, data insights director at Canstar. “While the RBA is unlikely to start hiking rates without plenty of notice, if inflation continues to move in the wrong direction, the next move from the central bank could be up rather than down.”
Thankfully this is looking more like a worst-case scenario than a likely development, although the hawkish contingent of the data-dependent Monetary Policy Board will be keeping a keen eye on inflation data into the new year.
RBA on edge
Following today’s GDP print, CBA head of Australian economics Belinda Allen surmised that the Australian economy “has reached its current speed limit”.
“At this stage we still expect the economy to walk the thin line in 2026,” said Allen. “We expect growth to remain around trend, but what is increasingly clear is that downside risks to growth have receded and the upside risks have become clearer.”
The RBA will nonetheless “be on edge”, she added. “And we expect the focus to be on upcoming price data to give a clearer indication of what the uptick in growth means for inflation.”
