Subject: Recent Developments in Inflation and the Economic Outlook

⚡️ Highlights:

1. Inflation in Australia unexpectedly picked up in the second half of 2025, with both headline and underlying inflation exceeding expectations.

2. Sector-specific price pressures, such as increases in travel and fuel prices, contributed to the unexpected inflationary pressures in the economy.

3. The unexpected strength in demand in the second half of 2025, driven by factors such as global economic resilience, domestic financial conditions, and stronger household incomes, also played a significant role in the inflationary pressures.

4. Capacity pressures in the economy were higher than previously assessed, with indicators such as business surveys showing increased capacity utilization and labor constraints.

5. The outlook for domestic growth and inflation is stronger than previously expected, with forecasts assuming a higher path for interest rates to help ease capacity pressures and bring the economy back to balance by mid-2028.

✍️ Reserve Bank of Australia | Full Article

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