EQ Economics managing director Warren Hogan has revealed the harsh truth about interest rates “no one wants to hear”.
All eyes were on the Australian Bureau of Statistics on Wednesday as it published the latest inflation results for the month of November, 2025.
To the delight of many, prices eased over the proceeding 12 months, leaving headline inflation at 3.4 per cent compared with 3.8 per cent in October.
Trimmed mean inflation, which strips out the more volatile components affecting consumer prices and is thus the Reserve Bank’s preferred measure, also moderated.
The trimmed mean figure fell 0.1 per cent to sit at 3.2 per cent for the November data set.
The softer than expected figures boosted hopes among mortgage holders the RBA could open the door to potential interest rate cuts, following several holds as prices ticked back upward.
However, Mr Hogan warned such a view was “naïve” as he explained the central bank was likely to remain concerned about the potential for further inflation hikes.
“It’s still even around three, four (per cent), above the RBA’s target and a lot higher than what it was six months ago. That is moving away from its target despite the fall this month,” he told Sky News.
“Inflation has stopped falling and never actually really got to the RBI’s target and now is rising again.
“The logical implication of all this is interest rates are not at the right level. No one wants to hear it, of course, and we don’t debate these things very well in our community, but the reality is interest rates are too low.”
In releasing the inflation figures for November last year, the ABS noted steep Black Friday discounts on furniture, footwear and clothing has all contributed to the softer than expected figures.
Those factors are temporary, leading many economists to predict an uptick in inflation when the next monthly data is released.
Slower than expected growth in electricity prices also contributed to the fall in consumer costs, but with government energy rebates expiring it is likely households and businesses will see steep bill hikes over the coming months.
As a result, most economists have all but ruled out interest rate cuts for the foreseeable future.
Mr Hogan, however, argued the RBA was not even in a position to hold rates steady at its next meeting on February 2nd and 3rd.
“We’ve got to get on with it and get those rates up a little bit,” he said.
“It’s their best chance of not having to raise rates a lot, you know, if they go early.”
Unfortunately for mortgage holders, the central bank has already signalled it may do just that.
Speaking after the RBA elected to keep rates steady in December, Governor Michele Bullock told media the bank’s board was having “uncomfortable” conversations about whether they could remain on hold.
“If inflation continues to be persistent and looks like it is not coming back down towards the board’s target, then… the board might have to consider whether or not it’s appropriate to keep interest rates where they are,” she said.