Australia's Central Bank Sounds Alarm on Inflation Outlook

Summary

RBA Assistant Governor Sarah Hunter warns that inflation expectations could become unanchored due to the oil-price shock from the Iran conflict. She stresses the central bank's commitment to bringing inflation back to target and notes the challenging environment of supply shocks. The interview covers the RBA's outlook on inflation, productivity, housing market, and the impact of government budgets.

• RBA Assistant Governor Sarah Hunter discusses inflation risks from the oil-price shock.
• She expresses concern that short-term inflation expectations could become unanchored.
• The RBA is monitoring medium and long-term inflation expectations closely.
• Underlying inflation moderated then picked up again due to capacity constraints and tariffs.
• Productivity growth is projected at around 0.7%, lower than historically.
• The RBA expects dwelling construction to slow due to previous cash rate increases.
• Wage growth is expected to remain around 3% as labor market conditions ease.
• The baseline forecast sees inflation returning to 2.5% by end of period, but with high uncertainty.