Economists warn RBA rate hikes could push Australian economy into recession

Commonwealth Bank chief economist Luke Yeaman warned that the Reserve Bank’s policy of raising interest rates to a 4.6% cash rate may soon backfire, potentially pushing the Australian economy into recession. He argued that the cumulative impact of four rate hikes this year has not yet been fully felt, and that further tightening amid oil prices staying above $100 a barrel would exacerbate inflation and strain already pressured households and a depressed housing market.

Market analysts assign a one-in-five probability of an additional hike at the November meeting, contingent on upcoming September inflation data. Yeaman suggested the RBA should adopt a conservative, fine-tuning stance and may need at most one more increase to bring inflation back to target. He also noted that an aggressive rate path could force the federal government, led by Treasurer Jim Chalmers, to consider spending adjustments, though the budget is expected to focus on cuts rather than relief. Oil price forecasts from Westpac’s Sian Fenner anticipate Brent averaging around $101 for the year’s final quarter, with risks of higher levels if geopolitical tensions rise, further complicating the RBA’s trade-off between inflation control and economic activity.