Maxco Futures – Sydney, December 9, 2025 — The Reserve Bank of Australia (RBA) decided to keep the benchmark interest rate unchanged at 3.60%, signaling a cautious monetary policy stance amid early signs of rising inflation and strengthening domestic economic activity. The decision was made unanimously by all members of the Monetary Policy Board.
Inflation Has Declined but Early Signs of Re-acceleration Appear
The RBA emphasized that inflation in Australia has fallen significantly from its 2022 peak, although recent months have shown a mild rebound, with some of the upward pressures considered temporary.
The central bank also highlighted that the monthly CPI series remains relatively new and should not be used as a basis for overly aggressive policy decisions. However, there are indications that some price pressures may prove persistent, which will remain a key concern in the months ahead.
Domestic Economic Activity Strengthens
On the growth side, the RBA sees clear signs of solid recovery:
• Household and business consumption and investment are improving in line with rising confidence.
• The housing market is showing higher prices and transaction volumes, signalling renewed momentum in the property sector.
• Financial conditions remain loose, with credit for households and businesses relatively easy to obtain.
• The impact of previous monetary easing continues to filter through the economy, providing additional support in the coming quarters.
These developments suggest that Australia’s economy has entered a more stable expansion phase compared with the previous year.
Labour Market Remains Tight
Although unemployment has risen slightly and job growth has moderated, the labour market remains relatively tight. Many businesses continue to report difficulties in recruiting new workers.
Wage growth measured by the Wage Price Index has eased from its peak, yet broader wage indicators still show strong increases. Unit labour costs also remain elevated, posing further risks to services inflation.
Key Risk: Inflation Could Reaccelerate
The RBA stressed that uncertainty surrounding inflation dynamics remains the most crucial risk for the policy outlook. If domestic demand continues to recover and economic capacity tightens further, the risk of inflation stabilizing at high levels—or even rising again—will increase.
The bank is also closely monitoring global conditions, including monetary policy in major trading partners, which could influence capital flows, exchange rates, and imported price pressures.
Policy Outlook: Data-Dependent
The Board reiterated that future decisions will be highly dependent on incoming economic data, with particular focus on:
• inflation,
• labour market conditions,
• household consumption trends,
• and global financial developments.
The RBA’s core mandate remains unchanged: ensuring price stability and maximizing employment. Amid an increasingly complex economic environment, the RBA has chosen to maintain a cautious stance to ensure inflation sustainably returns to the 2%–3% target band.
Ade Yunus, ST WPA
Global Market Strategies