It’s a future outlined in the quarterly Statement of Monetary Policy, which foreshadows a sharp downturn in growth, plunging household consumption, an evaporation of dwelling investment and a steady rise in unemployment through to mid-2028.<\/p>\n
Even then, inflation wouldn’t be entirely vanquished.<\/p>\n
Follow the day’s events and insights from our business reporters on the ABC News live markets blog.<\/a><\/p>\n According to the latest forecasts, underlying inflation would remain a problem until midway through next year and would really only be in the RBA’s comfort zone by early 2028.<\/p>\n There’s an odd quirk to these quarterly crystal ball-gazing exercises from our central bank.<\/p>\n Like all economic forecasts, they’re built upon a maze of assumptions about what the future may hold.<\/p>\n One of those assumptions is the direction and size of interest rate movements.<\/p>\n Naturally, the RBA wouldn’t plug in its own estimates, or it could be accused of flagging future rate moves.<\/p>\n Instead, it plugs in the average interest rate forecasts from money markets.<\/p>\n Essentially, it uses the guesswork from outsiders about what it might do in the future to predict a future that will dictate how it will determine interest rates. Round and round and round.<\/p>\n Little wonder the forecasts are notoriously unreliable.<\/p>\n If you’re looking for a silver lining, that’s another way of saying they are consistently, in fact, almost always, wrong.<\/p>\n The RBA’s decision follows a surprise increase in inflation. (ABC News: Matt Roberts)<\/p>\n 2025, the good old days<\/p>\n First, the rear view.<\/p>\n The economy ended 2025 in much stronger shape than the RBA expected.<\/p>\n Growth picked up at a much faster clip than previously anticipated, and the jobs market remained robust.<\/p>\n While the official numbers are yet to land, our central bank expects GDP to come in at 2.3 per cent for the year, way above the previously forecast 2 per cent.<\/p>\n That unexpected fillip wasn’t simply a result of the three rate cuts last year that are still working their way through the system.<\/p>\n Is 2025 ending with an AI bubble?<\/a><\/p>\n What makes the AI-driven stock market bubble unique in history is that if it’s not a bubble, the impact on humanity could be far more challenging than any previous technology.<\/p>\n Household consumption was better than expected, and so too was business investment, most of which was driven by the torrent of cash pouring into data centre construction.<\/p>\n The international climate contributed to that cheerier tone, too.<\/p>\n For all the fear and dire warnings on the impact of US President Donald Trump’s trade wa<\/a>r, which had been factored in throughout last year, the downside of America’s tariffs on everything<\/a> never really materialised.<\/p>\n Instead, the artificial intelligence boom<\/a> that has driven Wall Street for the past three years spilled over into East Asian markets, which helped drive demand for Australian exports.<\/p>\n Combined, that helps explain the continued strength of the Australian jobs market.<\/p>\n Higher rates may not fix the problem<\/p>\n And now for the not-so-pretty outlook.<\/p>\n When it comes to inflation<\/a>, even the RBA heavyweights have been taken aback by its strength.<\/p>\n That sounds an ominous warning.<\/p>\n Given the RBA’s raison d’etre is to contain inflation, the prospect of further rate hikes seems almost inevitable.<\/p>\n Except, and there’s always an exception, much of the recent resurgence in inflation, according to RBA officials, has been driven by factors that aren’t really related to excess demand.<\/p>\n Prices for things like durable goods, which tend to fluctuate, food, and domestic travel during the Christmas break, point to a price breakout that may not persist.<\/p>\n![\"People](\"https:\/\/www.newsbeep.com\/nz\/wp-content\/uploads\/2026\/02\/c9213a76c5f4c8f5e4774cfb884b6528.jpeg\")
<\/p>\n
![\"Residential](\"https:\/\/www.newsbeep.com\/nz\/wp-content\/uploads\/2026\/02\/e86f78f5f4e08d29ea5619bcf315f318.jpeg\")
<\/p>\n