MNI RBA Preview-May 2026: RBA Hike, CPI Too High

EXECUTIVE SUMMARY: 

• The RBA’s 5 May decision is expected to be closely contested, with another split vote possible, though most analysts still expect a 25bp hike given persistent inflation, excess demand, and early signs of price pass-through from higher costs linked to the Iran war and Strait of Hormuz disruption.
• Despite some argument for a “wait and see” approach, recent commentary from Deputy Governor Hauser suggests limited confidence that policy is restrictive enough, reinforcing the case for further tightening as firms continue to struggle passing on rising costs.
• Inflation remains above target on both headline and underlying measures, with trimmed mean around 3.5% and headline inflation rising to about 4%, while input cost pressures (fuel, shipping, labour, and materials) and inflation expectations are all trending higher.
• The labour market remains tight with job growth steady and unemployment stable around 4.2%, though softer consumer confidence and weaker consumption signals are being closely monitored alongside potential fiscal support and terms-of-trade benefits from higher energy prices.
• If the RBA hikes in May, it may then pause to assess incoming data, but more tightening cannot be ruled out; policy decisions will be highly data-dependent, with key releases (jobs, CPI, GDP, wages, Budget) and updated forecasts in August likely shaping the next move.

FOR THE FULL PUBLICATION PLEASE USE THE FOLLOWING LINK: RBA Preview - May 2026.pdf