Reserve Bank of Australia warns higher, longer‑lasting interest rates

Oxford Economics chief global economist Ryan Sweet warned that persistent supply‑chain shocks in Europe, the Middle East and tariff regimes have pushed Australian inflation higher, meaning interest rates are likely to stay elevated for an extended period. He noted that after a historic slide to 0.10 % during the pandemic, the cash rate has risen to 4.35 % and is expected to remain on hold for the rest of the year before a gradual easing may begin in 2027.

Sweet highlighted that Australia’s economy is especially sensitive to rate moves because most households hold variable‑rate mortgages, so even modest rate changes have a pronounced impact on consumer confidence, spending and the labour market. He cautioned that the current surge in oil prices linked to the Middle East conflict will further weigh on inflation, which remains above the Reserve Bank’s 2‑3 % target.