Aura Group sees persistent domestic inflation keeping Australian monetary policy restrictive
TLT•Aura Group said underlying inflation is expected to remain above 3% until late 2027 after the RBA raised its cash rate by 25 basis points to 4.85% in November 2026. Markets cut the probability of another increase by February 2027 to 30% from about 50%.
1. Inflation and rates
The RBA raised its cash rate by 25 basis points to 4.85% in November 2026, responding primarily to domestic capacity constraints. Underlying inflation is expected to remain above 3% until late 2027, keeping monetary conditions restrictive for an extended period; markets lowered the chance of another increase by February 2027 to 30% from approximately 50% as policymakers signaled a more measured approach. Dwelling prices fell almost 5% from their March peak, while forecasts for household consumption and dwelling investment were lowered and higher labor, energy and input costs pressured business margins.
